Liquidator's rejection of belated claim without interest upheld under Section 42 IBC timeline requirements

The NCLAT dismissed an appeal challenging the Liquidator's rejection of a belated claim. The Appellant failed to file their claim within the prescribed timeline under the public announcement and subsequently filed a belated claim without interest component. When later claiming interest, the NCLAT held this was an afterthought not substantiated at the time of original filing. The Appellant's attempt to circumvent Section 42 IBC remedy by filing under Section 60(5) was rejected. The NCLAT upheld that claims must be filed within prescribed timelines, interest must be included in original claims, and the Liquidator's conduct in seeking NOC for sub-contractor settlements was justified within his duties.

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The judgment involves an appeal before the National Company Law Appellate Tribunal (NCLAT) concerning the rejection of a claim by the Liquidator in the liquidation proceedings of a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeal was filed by the Appellant against the order of the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-I) which dismissed the Appellant's application challenging the Liquidator's decision.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment include:

• Whether the Appellant's claim, including interest on delayed payment, should be accepted as part of the Corporate Insolvency Resolution Process (CIRP) costs under Section 53(1)(a) of the IBC.
• Whether the Appellant's failure to file their claim within the prescribed timeline affects their entitlement to the claimed amount, including interest, under the liquidation process.
• Whether the Liquidator's actions in seeking a No Objection Certificate (NOC) from the Appellant for settling claims of sub-contractors were justified.
• Whether the Appellant's reliance on Section 60(5) of the IBC to challenge the rejection of their claim was appropriate.

2. ISSUE-WISE DETAILED ANALYSIS

Claim for Interest as CIRP Costs

• Relevant Legal Framework and Precedents: The Appellant argued that their claim, including interest, should be treated as CIRP costs under Section 53(1)(a) of the IBC. They cited precedents such as Prashant Agarwal Vs Vikash Parasrampuria, which held that interest on delayed payment specified in an invoice entitles a creditor to a right to payment under Section 3(6) of the IBC.
• Court's Interpretation and Reasoning: The Tribunal noted that the Appellant failed to include the interest component in their claim filed with the Liquidator. The claim for interest was raised much later, which the Tribunal found to be an afterthought. The Tribunal emphasized that claims must be crystallized on the liquidation commencement date as per Regulation 16 of the IBBI (Liquidation Process) Regulations, 2016.
• Key Evidence and Findings: The Appellant's invoices dated 25.06.2019 for interest were raised long after the liquidation commencement date and were not part of the original claim filed.
• Application of Law to Facts: The Tribunal found that the Appellant's failure to file their claim, including interest, within the prescribed timeline led to the rejection of their claim. The Tribunal agreed with the Liquidator's decision to reject the claim for interest as it was not substantiated at the time of filing.
• Conclusions: The Tribunal upheld the Liquidator's rejection of the interest claim, stating that the Appellant could not introduce interest claims after the liquidation commencement date.

Timeliness of Claim Filing

• Relevant Legal Framework: Section 42 of the IBC provides that a creditor may appeal against the Liquidator's decision within fourteen days of receiving the decision.
• Court's Interpretation and Reasoning: The Tribunal noted that the Appellant failed to challenge the Liquidator's rejection of their claim within the prescribed timeline under Section 42 of the IBC. The Tribunal emphasized that statutory timelines must be adhered to.
• Conclusions: The Tribunal concluded that the Appellant's failure to challenge the rejection in a timely manner led to the finality of the Liquidator's decision.

Liquidator's Request for NOC

• Relevant Legal Framework: The Liquidator's role under the IBC includes ensuring the timely completion of the liquidation process.
• Court's Interpretation and Reasoning: The Tribunal found that the Liquidator's request for an NOC from the Appellant to settle the claims of sub-contractors was within the scope of his duties. The Tribunal noted that the Liquidator acted fairly to avoid duplication of claims and to protect the interests of all stakeholders.
• Conclusions: The Tribunal held that the Liquidator's actions were justified and that the Appellant's refusal to issue the NOC was unreasonable.

3. SIGNIFICANT HOLDINGS

• The Tribunal held that claims must be filed within the prescribed timeline, and failure to do so results in the finality of the Liquidator's decision.
• The Tribunal emphasized that interest claims must be substantiated and included in the original claim filed with the Liquidator, and cannot be introduced later.
• The Tribunal concluded that the Liquidator's request for an NOC to settle sub-contractors' claims was justified and within the scope of his duties.
• The Tribunal dismissed the appeal, finding no merit in the Appellant's contentions and upholding the Adjudicating Authority's order.

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