2023 (2) TMI 186 - AT - Insolvency and Bankruptcy

Secured creditors limited to Form D amounts at liquidation start date, no additional interest claims allowed. Upholding statutory scheme.

DBS BANK INDIA LIMITED Versus KULDEEP VERMA, LIQUIDATOR OF EASTERN GASES LIMITED (CORPORATE DEBTOR)

The Tribunal held that secured creditors must limit their claims to the amounts stated in Form D as of the liquidation commencement date. Any additional ... Right of secured creditor to recover his dues (during liquidation proceedings) - Seeking direction to Appellant to make the payment of 1.84 Crores to the liquidation estate along with interest at the rate of 6% - whether the secured creditor’s claim has to be confined to the amount of principal and interest as claimed in Form D filed by the secured creditor or secured creditor in addition to the amount claimed in Form D can also claim further amount in the facts of the present case? HELD THAT:- In the present case, Liquidation Commencement Date is a date when the Adjudicating Authority passed the Order of Liquidation. Thus claim has to be with reference to the liquidation commencement date. The statute pegs the claim on a particular date for a purpose and object. When a claim is filed in Form D where interest and principal have been included up to the date of liquidation commencement date, claimants cannot be allowed to claim any further amount in addition to the amount which they have claimed in their Form D. The IBC contains particular statutory scheme under which Liquidation Process has to be undertaken. The claim of all stakeholders are claims invited by the Liquidator as per the Liquidation Regulation and after receipt of the claims, further steps have to be taken in accordance with the claims received. Permitting any claimant to increase his claim on any ground or reason will not be in accordance with the liquidation scheme as contemplated by the Liquidation Process, Regulations. The statutory scheme provides submission of claim on a liquidation commencement date which is a fixed connotation. When a statute provides for liquidation commencement date as a date up to which claims can be filed and proved, no claim thereafter can be entertained by the Liquidator. The amount of interest which was retained by the Appellant claiming to be interest in addition to the claim as filed by it in Form D till the date of realization of receipt of the sale, cannot be permitted to be retained by the Appellant and the Adjudicating Authority has rightly passed the order allowing application filed by the Liquidator to hand over the additional amount to the Liquidator. Learned Counsel for the Appellant submits that out of Rs. 1.84 Crores, amount of Rs. 20 Lakhs have already been paid. There are no error in the order passed by the Adjudicating Authority allowing an Application filed by the Liquidator - there is no error in the appeal - appeal dismissed. Issues Involved:1. Whether the secured creditor's claim should be confined to the amount of principal and interest as claimed in Form D filed by the secured creditor or if the secured creditor can also claim further amounts in the present case.Issue-wise Detailed Analysis:1. Confined Claims to Form D:The core issue revolves around whether the secured creditor, the Appellant, can claim interest beyond the amount specified in Form D up to the date of actual realization of the sale proceeds. The Appellant argued that under Section 52 of the Insolvency and Bankruptcy Code (IBC), a secured creditor is entitled to realize its security interest and claim interest until the date of realization. The Appellant contended that the term 'debt' includes interest up to the date of realization, not just up to the liquidation commencement date.2. Liquidator's Argument:The Liquidator contended that the Appellant is only entitled to the amount claimed in Form D as of the Liquidation Commencement Date and cannot claim any additional interest accrued after this date. The Liquidator emphasized that the statutory scheme under the IBC and Liquidation Process Regulations requires claims to be pegged at the liquidation commencement date.3. Tribunal's Examination:The Tribunal examined the relevant provisions of the IBC and Liquidation Process Regulations. Section 52 of the IBC allows secured creditors to realize their security interest, and Section 52(7) mandates that any surplus from the enforcement of the security interest must be accounted for to the liquidator. The Tribunal also referred to the definitions of 'claim' and 'debt' under Sections 3(6) and 3(11) of the IBC, respectively.4. Liquidation Process Regulations:The Tribunal highlighted that Regulation 16 of the Liquidation Process Regulations requires stakeholders to submit claims, including interest, as of the liquidation commencement date. Form D, used for proving claims by financial creditors, explicitly mentions that the total amount of the claim, including interest, should be as of the liquidation commencement date. Thus, the statute pegs the claim on a specific date to ensure a structured and predictable liquidation process.5. Tribunal's Conclusion:The Tribunal concluded that the Appellant's claim should be confined to the amount specified in Form D, including interest up to the liquidation commencement date. Allowing any further claims for interest beyond this date would not align with the statutory scheme of the IBC and the Liquidation Process Regulations. The Tribunal noted that the statutory scheme aims to provide a clear and fixed connotation for claims, ensuring that no claims beyond the liquidation commencement date can be entertained.6. Final Order:The Tribunal upheld the Adjudicating Authority's order directing the Appellant to pay Rs. 1.84 crores to the liquidation estate along with interest at 6% from April 1, 2021, until the actual payment date. The Tribunal dismissed the appeal, finding no merit in the Appellant's arguments.Summary:The Tribunal's judgment emphasized that claims by secured creditors must be confined to the amounts specified in Form D as of the liquidation commencement date. The structured statutory scheme under the IBC and Liquidation Process Regulations does not permit claims for additional interest accrued after this date. The Tribunal upheld the Adjudicating Authority's order directing the Appellant to pay the excess realized amount to the liquidation estate.