NCLAT Upholds Partial Claim Rejection Under Section 36 of IBC; Appeal Dismissed

The NCLAT upheld the partial rejection of the appellant's claim in the CIRP, finding no merit in the argument that the entire claim must be admitted under Section 36 of the IBC. The claim was verified and only partially admitted, and the appellant did not challenge this further during the process. The resolution professional's refusal to accept the full claim did not amount to an invalid order. The tribunal declined to opine on the appellant's status as an operational creditor since the admitted claim was being paid by the SRA. The adjudicating authority's order was affirmed, and the appeal was dismissed.

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1. ISSUES PRESENTED and CONSIDERED

• Whether the Resolution Professional (RP) had jurisdiction to partially admit the claim submitted by the appellant and reject the balance claim amount.
• Whether the entire claim of the appellant, relating to Provident Fund dues, was required to be admitted in the Corporate Insolvency Resolution Process (CIRP) as per Section 36 of the Insolvency and Bankruptcy Code (IBC).
• Whether the claim based on an assessment order passed during the moratorium period can be admitted or rejected by the RP.
• Whether the appellant's failure to challenge the partial admission of the claim affects the entitlement to the full claim amount.
• Whether the appellant qualifies as an operational creditor in the context of the admitted claim and the resolution plan.
• Whether the adjudicating authority erred in approving the resolution plan despite the appellant's objections regarding claim admission.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction of the RP to Admit or Reject Claims

Legal Framework and Precedents: Under the CIRP Regulations, the RP is vested with the authority to collate, verify, and admit claims submitted by creditors. The admission of claims is subject to verification against the books of accounts and other relevant documents of the corporate debtor.

Court's Interpretation and Reasoning: The Court noted that the RP, after due verification of the appellant's claim, admitted only a portion amounting to Rs. 18,76,448/- based on the corporate debtor's books of account. The RP's decision was communicated to the appellant and remained unchallenged.

Key Evidence and Findings: The appellant's claim was initially for Rs. 54,56,26,369/-, but the RP admitted only the verified portion. The communication of partial admission was not disputed or challenged by the appellant.

Application of Law to Facts: The RP acted within the scope of his jurisdiction under the CIRP Regulations by verifying and admitting only the substantiated portion of the claim. The appellant's contention that the RP had no jurisdiction to reject the balance claim was rejected.

Treatment of Competing Arguments: The appellant argued for full admission of the claim; however, the RP's reliance on verification and the books of account was upheld. The Court found no merit in the submission that RP's jurisdiction was exceeded.

Conclusion: The RP had jurisdiction to partially admit and reject claims based on verification; the partial admission was valid.

Issue 2: Requirement to Admit Entire Provident Fund Claim Under Section 36 of IBC

Legal Framework and Precedents: Section 36 of the IBC mandates that certain dues, including provident fund dues, are to be kept out of the liquidation estate and have priority in payment.

Court's Interpretation and Reasoning: The Court observed that the appellant's entire claim was subject to verification and only the verified portion was admitted. The mere submission of a large claim does not mandate automatic admission of the entire amount.

Key Evidence and Findings: The admitted claim was less than the claimed amount and was accepted by the SRA for payment. The appellant did not challenge the partial admission.

Application of Law to Facts: The Court held that Section 36 does not compel admission of unverified or unsubstantiated claims in full. The admitted claim was to be paid in accordance with the resolution plan.

Treatment of Competing Arguments: The appellant's argument for full admission under Section 36 was rejected due to lack of challenge to the verification process and partial admission.

Conclusion: Only the verified and admitted portion of the provident fund claim is required to be admitted and paid under the CIRP; full claim admission is not automatic.

Issue 3: Validity of Claim Based on Assessment Order Passed During Moratorium

Legal Framework and Precedents: The moratorium under IBC prohibits certain actions against the corporate debtor, but statutory dues enforcement by entities like EPFO is recognized subject to verification.

Court's Interpretation and Reasoning: The claim was partly based on an assessment order dated 06.07.2019, passed during the moratorium period. The RP rejected the claim on this basis, relying instead on the books of account.

Key Evidence and Findings: The adjudicating authority directed the RP to examine the claim with reference to the books of account and relevant judgments, including one affirming that moratorium does not bar enforcement of statutory dues.

Application of Law to Facts: The RP's rejection of the claim based on the moratorium-period assessment was consistent with the requirement to verify claims on merits and not merely on unchallenged assessment orders.

Treatment of Competing Arguments: The appellant contended the RP had no jurisdiction to ignore the assessment order; the Court held the RP's role was to verify claims, not adjudicate on the validity of assessment orders.

Conclusion: The RP rightly rejected the claim based on the moratorium-period assessment order, focusing on verified accounting records.

Issue 4: Effect of Failure to Challenge Partial Admission of Claim

Legal Framework and Precedents: Procedural fairness and finality principles require parties to challenge adverse decisions within prescribed forums and timelines.

Court's Interpretation and Reasoning: The appellant did not challenge the RP's communication of partial admission dated 25.07.2023 or the adjudicating authority's earlier order of 23.05.2023. The Court emphasized that failure to challenge amounts to acceptance of the partial admission.

Key Evidence and Findings: The appellant's affidavit confirmed no challenge was made to the partial admission.

Application of Law to Facts: The Court held that the appellant cannot now seek full admission after acquiescing to partial admission without contesting it in the proper forum.

Treatment of Competing Arguments: The appellant sought to revive the full claim despite inaction; the Court rejected this on procedural grounds and principles of estoppel.

Conclusion: The appellant's failure to challenge partial admission precludes entitlement to the full claim amount.

Issue 5: Status of the Appellant as Operational Creditor

Legal Framework and Precedents: Operational creditor status is determined by the nature of the claim and statutory provisions under IBC.

Court's Interpretation and Reasoning: The appellant contended it was not an operational creditor. The Court noted that since the admitted claim is being paid by the SRA, the issue of operational creditor status was not necessary to decide.

Key Evidence and Findings: No material was found to require determination of operational creditor status.

Application of Law to Facts: The Court refrained from expressing any opinion on this issue as it was not essential to the resolution of the appeal.

Treatment of Competing Arguments: The appellant's submission on this point was noted but not adjudicated.

Conclusion: No determination on operational creditor status was made.

Issue 6: Validity of Adjudicating Authority's Approval of Resolution Plan

Legal Framework and Precedents: The adjudicating authority's approval of a resolution plan is subject to compliance with IBC provisions and proper admission of claims.

Court's Interpretation and Reasoning: The Court found no infirmity in the adjudicating authority's approval of the resolution plan, given the verified admission of the claim and the absence of any challenge to the partial admission.

Key Evidence and Findings: The resolution plan was approved by the Committee of Creditors and sanctioned by the adjudicating authority.

Application of Law to Facts: The Court held that the approval was lawful and did not warrant interference.

Treatment of Competing Arguments: The appellant's challenge to the approval based on claim admission was rejected.

Conclusion: The adjudicating authority's order approving the resolution plan stands affirmed.

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