2023 (6) TMI 547 - AT - Insolvency and Bankruptcy

Appellant's Financial Claim Kept in Abeyance During Arbitration

The National Company Law Tribunal, Amaravati Bench upheld the decision of the Resolution Professional (RP) to keep the Appellant's financial claim in ... Admission and collation of claims - disputed claims and pendency of arbitration - keeping claims in abeyance - powers of the resolution professional - administrative not adjudicatory - determination of claim quantum and set off pending counterclaim - participation in the committee of creditors and voting rights - claim for damages versus debt - liability adjudicated by award or decreeAdmission and collation of claims - keeping claims in abeyance - powers of the resolution professional - administrative not adjudicatory - Whether the Resolution Professional was justified in keeping the Appellant's submitted claim in abeyance pending determination of arbitration proceedings and the corporate debtor's counterclaim. - HELD THAT: - The Tribunal accepted the Resolution Professional's approach that his duty was to collect and collate claims and that admission of a claim may be kept in abeyance where pending proceedings (here, arbitration and a counterclaim) could affect both liability and quantum. The Tribunal noted that the Resolution Professional complied with the mandate to collect and collate the claim and that, in exigent circumstances, keeping claims in abeyance is permissible; instances of such practice by RPs and precedents were referenced. In the present case the counterclaim could lead to a set off which would directly affect the amount payable to the claimant, and therefore the RP was within his power and limits to defer admission until the arbitral determination enabled certainty as to liability and quantum. On that basis the Tribunal concluded the impugned order dismissing the interlocutory application was free from flaw. [Paras 39, 40]Resolution Professional was justified in keeping the claim in abeyance pending the arbitration/counterclaim; relief for admission of the claim was refused.Disputed claims and pendency of arbitration - determination of claim quantum and set off pending counterclaim - participation in the committee of creditors and voting rights - claim for damages versus debt - liability adjudicated by award or decree - Whether the Appellant was entitled to admission of its claim as a financial debt, and consequent inclusion in the Committee of Creditors with voting rights, despite the claim being disputed and subject to pending arbitral proceedings. - HELD THAT: - The Tribunal examined the Appellant's contention that the advance and interest constituted a financial debt and that disputed claims must nevertheless be collated and admitted. It also considered authority on claims for damages not constituting a debt until adjudicated. The Tribunal observed that where a counterclaim is pending and may give rise to set off, admission and fixation of admitted quantum could not be done with requisite certainty. Given that the RP had collated the claim but kept admission in abeyance pending the arbitral outcome which would determine liability/quantum and potential set offs, the Tribunal held that the Appellant's prayer for admission and consequent inclusion in the CoC could not be acceded to at this stage. [Paras 39, 40]Appellant not entitled to admission of the disputed claim or to be admitted to the CoC with voting rights until the arbitral proceedings and counterclaim are determined.Final Conclusion: The appeal is dismissed; the National Company Law Appellate Tribunal upheld the impugned order which declined to direct admission of the disputed claim and affirmed the Resolution Professional's decision to keep the claim in abeyance pending resolution of arbitration and counterclaim. Issues Involved:1. Whether the Resolution Professional (RP) was justified in keeping the Appellant's financial claim in abeyance due to pending arbitration proceedings and counterclaims of the Corporate Debtor.2. Whether the Appellant's financial claim should be admitted and the Appellant included in the Committee of Creditors (CoC).Summary:Issue 1: Justification for Keeping Claim in AbeyanceThe Adjudicating Authority (National Company Law Tribunal, Amaravati Bench) observed that the Insolvency and Bankruptcy Code (IBC) mandates the Resolution Professional (RP) to collect and collate claims. However, when a dispute regarding the amount due and interest is pending, the RP cannot admit the claim to avoid conflicting judgments. The RP complied with the mandate of collecting and collating the claim but kept it in abeyance due to the pending arbitration proceedings and counterclaims of the Corporate Debtor. The Authority cited judgments, including EXIM Bank Vs. Resolution Professional JEKPL Private Limited and Reliance Commercial Finance Limited Vs. Ved Cellulose Limited, to support that claims can be kept in abeyance under certain circumstances.Issue 2: Admission of Appellant's Financial ClaimThe Appellant, a Financial Creditor, argued that its claim is an admitted and acknowledged liability, and the RP's failure to admit the claim due to pending arbitration and counterclaims is unlawful. The Appellant cited various judgments, including Innoventive Industries Limited v. ICICI Bank & Anr. and Pioneer Urban Land and Infrastructure Limited v. Union of India, to support that a claim can be made whether or not it is reduced to judgment and that the existence of a dispute does not impede the admission of a claim.Assessment:The Tribunal noted that the RP kept the claim in abeyance due to pending arbitration proceedings and counterclaims, which could result in a set-off of amounts payable to the Appellant. The RP's action was within his power and limit to keep claims in abeyance under such circumstances. The Tribunal concluded that the RP's action was justified and the reliefs prayed for by the Appellant could not be granted. The impugned order dated 02.12.2022, dismissing the Appellant's application, was upheld.Result:The appeal was dismissed, and the IA No. 26 of 2023 (For Stay) was closed.