IRP/RP must admit creditor's timely CIRP claim after wrongful rejection despite binding precedent, verify claims diligently

The NCLAT allowed the appeal, holding that the IRP/RP must receive, collate and verify claims diligently and impartially. The creditor had submitted proof within the prescribed 90-day period and the RP erred in rejecting the claim on a legal interpretation, despite an existing SC precedent on the issue. The NCLT's rejection was therefore incorrect. The RP's omission materially affects the unresolved resolution plan, which has not been approved, and the claim must be treated consistently with the law and admitted into the CIRP.

---

---

ISSUES PRESENTED AND CONSIDERED

1. Whether a creditor who has filed and had its claim admitted in the CIRP of the principal debtor can file and have admitted the same claim against the corporate guarantor in the guarantor's CIRP.

2. Whether a Resolution Professional/Interim Resolution Professional is obliged to receive, collate and verify a timely filed claim notwithstanding prior rejection based on then-prevailing judicial view, and whether failure to admit such a claim constitutes a material irregularity affecting the resolution process.

3. Whether a belated application to entertain a claim (after prior rejection and at an advanced stage of CIRP when resolution plans are negotiated/submitted) can be refused solely on the ground that entertaining it would delay the time-bound CIRP, including where the claim was originally filed within the time permitted by Regulation 12.

4. The legal effect of a resolution plan or liquidation of the principal debtor on the independent liability of a personal/corporate guarantor under the contract of guarantee.

ISSUE-WISE DETAILED ANALYSIS - ISSUE 1: Admissibility of same claim in CIRP of Guarantor where admitted in Principal Debtor's CIRP

Legal framework: Regulation 12 of the CIRP Regulations requires submission of claims with proof within the publicised timeline or within 90 days of insolvency commencement date; Section 18(1)(b) & Section 25(2)(e) impose duties on IRP/RP to receive, collate and maintain an updated list of claims. The Code recognises independent contracts of guarantee and treatment of guarantor's liability under general contract law principles.

Precedent Treatment: Two lines of NCLAT authority existed on whether the same claim can be admitted against both principal and guarantor; subsequent Supreme Court authority clarified that a guarantor's liability under an independent guarantee is not ipso facto discharged by insolvency/liquidation of the principal debtor.

Interpretation and reasoning: The Court observed that the guarantee is an independent contract and that creditor's remedy against guarantor survives involuntary discharge of the principal. Consequently, filing of claim in guarantor's CIRP is legally permissible even if claim existed in principal's CIRP. The Resolution Professional's rejection based on an earlier NCLAT view was an interpretation error in light of binding higher-court pronouncements affirming independence of guarantee obligations.

Ratio vs. Obiter: Ratio - A claim founded on an independent contract of guarantee can be filed in the CIRP of the guarantor notwithstanding prior filing in the CIRP of the principal debtor; guarantor's liability survives liquidation/insolvency of the principal. Obiter - Observations about bench-strength divergences of tribunal precedents and advisability of seeking clarification from appellate forum.

Conclusions: The creditor was entitled to have its claim examined in the guarantor's CIRP on merits; rejection solely on the ground that the claim was admitted in the principal debtor's CIRP was legally unsustainable in light of higher court law.

ISSUE-WISE DETAILED ANALYSIS - ISSUE 2: Duties of RP/IRP to receive, collate and verify timely filed claims and legal consequence of failure

Legal framework: Sections 18(1)(b) and 25(2)(e) of the Code mandate IRP/RP to receive, collate and maintain updated list of claims; Regulations 12 and relevant CIRP Regulations govern timing and form of claim submission; the time-bound object of the Code must be balanced with duties owed to creditors.

Precedent Treatment: Supreme Court authority emphasises both strict timelines and fair treatment of claims; jurisprudence recognises that form is directory where substantive proof exists; failure to acknowledge a timely claim can vitiate a resolution process (as indicated by later decisions setting aside plans for omission of a creditor's claim).

Interpretation and reasoning: The Court held that where a creditor submitted claim with proof within the 90-day window, the RP had an obligation to apply correct legal position and process the claim. The RP's repeated rejections based on an arguably incorrect interpretation constituted an omission that materially affected the process. The RP, as a technical expert, must implement the law of the land and exercise diligence, fairness and neutrality in collating and verifying claims.

Ratio vs. Obiter: Ratio - An IRP/RP is duty-bound to receive and verify timely claims and cannot refuse admission based on a misconstruction of settled law; failure to do so may constitute a material irregularity justifying corrective relief. Obiter - Comments on the practical expectation that technical officers should update legal position once higher court law is available.

Conclusions: The RP's refusal to admit a timely filed claim, when higher-court law supported admission, was erroneous and required remediation by directing verification and admission as per law.

ISSUE-WISE DETAILED ANALYSIS - ISSUE 3: Permissibility of entertaining claim at an advanced stage of CIRP and effect of time-bound process

Legal framework: The Code and CIRP Regulations prescribe time-bound stages for CIRP; courts and tribunals have underscored the need to adhere to timelines to maximize value. Regulations permit late claims only within prescribed limits; prior jurisprudence permits rejection of belated claims where admission would jeopardise timeliness and fairness of the process.

Precedent Treatment: NCLAT/NCLT decisions have held that admission of fresh claims at an advanced stage may be refused to prevent prejudice to the CIRP process; however, Supreme Court jurisprudence also emphasises that omission of valid claims from process/plan may vitiate a plan.

Interpretation and reasoning: The Court balanced two public policy aims - timeliness of CIRP and completeness/fairness in claim recognition. Where a claim was originally filed within Regulation 12 timelines (90 days) but subsequently rejected due to legal interpretation errors by the RP, mere lapse of time and advanced stage of CIRP are insufficient grounds to refuse correction. The Court found that the initial claim was timely and the RP's error (not the claimant's delay) produced the "belated" correction; therefore, the NCLT's rejection for being belated after three years was not justified in the circumstances.

Ratio vs. Obiter: Ratio - A claim originally filed within prescribed timelines should not be defeated at a later stage solely because the claimant sought enforcement after RP's erroneous rejection, particularly where the RP's error caused the delay in effective adjudication; timeliness cannot be used to perpetuate procedural error that materially affects the plan. Obiter - Guidance on the need to avoid reopening CIRP unduly where true belated claims (not timely filed) are sought to be admitted.

Conclusions: Rejection of the claim at the advanced stage of CIRP, where the underlying claim had been duly submitted within time and rejected earlier due to legal misinterpretation, was not permissible; the RP must verify and entertain the claim notwithstanding advanced stage, subject to practical directions to avoid prejudice to bona fide commercial processes.

ISSUE-WISE DETAILED ANALYSIS - ISSUE 4: Effect of resolution plan/liquidation of principal debtor on guarantor's liability

Legal framework: Principles of contract law (Section 128 and Section 134 of the Contract Act as explicated by higher courts) and insolvency jurisprudence addressing surety liability; Code provisions on approval of resolution plan and finality under Section 31.

Precedent Treatment: Apex Court has held that sanction of a resolution plan or liquidation of the principal does not per se discharge a guarantor; guarantor's liability, being independent, survives involuntary discharge of the principal unless contractually provided otherwise.

Interpretation and reasoning: The Court relied on the settled principle that discharge of the principal debtor by operation of law does not automatically absolve the guarantor, who remains liable according to the terms of the guarantee. Thus, approval of a resolution plan or liquidation of the principal does not ipso facto extinguish the creditor's right to proceed against guarantor or to have the guarantor's claim adjudicated in its CIRP.

Ratio vs. Obiter: Ratio - Guarantor's liability under an independent contract is not extinguished by liquidation or approval of a resolution plan in respect of the principal; therefore, claims against guarantors remain cognisable. Obiter - None material beyond reaffirmation of settled law.

Conclusions: The creditor's right to seek realization from the guarantor survives the principal debtor's insolvency/liquidation or resolution plan approval; RP's refusal premised on discharge of principal was unfounded.

OVERALL CONCLUSION AND RELIEF DIRECTED

The Court held that the impugned refusal to admit/verify the appellant's timely filed claim in the guarantor's CIRP was erroneous: (a) guarantor's liability is independent and admissible notwithstanding claim in the principal's CIRP; (b) the RP/IRP is duty-bound to collate and verify timely claims and apply the law of the land; and (c) rejection at an advanced stage of CIRP solely on timeliness grounds, when the initial filing was within Regulation 12 and the rejection was due to the RP's legal interpretation, was unjustified. The impugned order rejecting the application was set aside and the RP was directed to verify and entertain the claim as per law. No order as to costs.

---