Claim Rejection Upheld; Resolution Plan Confirmed Under Section 30(2)(b) IBC for Delay, Lack of Proof and CoC Wisdom

NCLAT upheld rejection of the appellant's claim and affirmed approval of the resolution plan for the corporate debtor. It held that, although earlier proceedings before HC and SC had acknowledged expenses incurred by the appellant, the appellant failed to file its claim within the CIRP timelines and did not substantiate the claimed amount or the massive interest component with requisite documents under the IBC framework. NCLAT found no contravention of Section 30(2)(b) IBC or CIRP Regulations and reiterated that the commercial wisdom of the CoC, which approved the plan with 100% voting share, could not be interfered with. The appeal was disposed of, allowing the successful resolution applicant to proceed.

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1. ISSUES PRESENTED AND CONSIDERED

(1) Whether the impleadment application by the State, challenging dealing with certain land in the resolution plan, was maintainable at the appellate stage.

(2) Whether the appellant's expenditures under a court-sanctioned revival scheme conferred on it the status of a creditor (financial or operational) of the corporate debtor under the Insolvency and Bankruptcy Code, 2016, and the effect of the setting aside of the Single Bench revival order.

(3) Whether, after transfer of the winding up proceedings to the NCLT, the adjudication of the appellant's claim was to be governed exclusively by the IBC regime, and the legal effect of the Official Liquidator's prior adjudication admitting the claim in part.

(4) Whether the Resolution Professional acted correctly in rejecting the appellant's claim on grounds of delay, lack of proof and absence of contractual basis for interest, and whether the RP was bound to consider or follow the Official Liquidator's report.

(5) Whether approval of the resolution plan was vitiated by "material irregularity" or contravention of law because the appellant's claim was rejected / not admitted, and whether any prejudice arose to the appellant in view of the plan structure and CoC's commercial decision.

(6) What relief, if any, could be granted in respect of the amount of Rs. 57.68 lakhs earlier admitted by the Official Liquidator, in light of the Successful Resolution Applicant's offer to pay this amount without disturbing the resolution plan.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Impleadment of the State in appeal against plan approval

Interpretation and reasoning

The Tribunal noted that the State had earlier filed an application before the Adjudicating Authority seeking rejection of the resolution plan on the ground that the subject land was only retained by, and not owned by, the corporate debtor. That application was dismissed and the order attained finality as it was not challenged. The State also did not challenge the subsequent order approving the resolution plan. The present impleadment attempt, at the appellate stage in an appeal filed by another party and on uncommon grounds, was held to be an indirect attempt to reopen settled issues and seek reliefs which could not now be claimed.

Conclusion

The impleadment application by the State was held to be devoid of merit and was dismissed.

Issue (2): Status of the appellant as creditor in light of the revival scheme and its setting aside

Legal framework discussed

The Tribunal examined: (a) the Single Bench order approving a revival scheme and inducting the appellant as "promoter" with specified rights and liabilities; (b) the Division Bench order setting aside that Single Bench order and remitting the matter to the Company Judge while directing the Official Liquidator to take possession; and (c) subsequent High Court and Supreme Court directions permitting the appellant to lodge and have its claim adjudicated in liquidation.

Interpretation and reasoning

The Adjudicating Authority had relied on the Single Bench order to hold that the appellant was only an investor-promoter and not a financial or operational creditor, and that no debt was owed to it. The Tribunal held this approach to be erroneous because the Single Bench order had been expressly "set aside" by the Division Bench and therefore no longer had legal force; it could not be used either to deny or to support creditor status.

However, the Tribunal noted that the Division Bench and later orders of the High Court and the Supreme Court recognised the factual position that the appellant had made investments/expenditures in the corporate debtor pursuant to a court-mandated revival scheme, and directed adjudication of those claims. Acting on those directions, the Official Liquidator had examined the material and admitted expenditure to the tune of Rs. 57.68 lakhs, rejecting the balance, including the interest component.

In this backdrop, the Tribunal held that the sweeping conclusion of the Adjudicating Authority-that the appellant could not, in law, have any financial or operational debt claim-was unsustainable. The fact that the revival scheme did not survive did not wipe out the fact of expenditures incurred; the question was whether and to what extent such expenditures could constitute a claim under the IBC framework.

The Tribunal also rejected the appellant's reliance on the Single Bench order to assert priority superior even to secured creditors, and distinguished the judgment relied on regarding statutory secured status, holding that such reasoning did not apply here.

Conclusions

(a) The Single Bench revival order, having been set aside, could not be relied upon either to deny or to enhance the appellant's status under IBC.

(b) The existence of expenditures incurred by the appellant on the corporate debtor, and partial admission thereof by the Official Liquidator, was recognised; the absolute denial of the possibility of a debt claim under IBC was incorrect in principle, though subject to the IBC framework and subsequent findings.

Issue (3): Effect of transfer from winding up to CIRP and role of the Official Liquidator's report

Legal framework discussed

The Tribunal referred to the Supreme Court's order transferring the company petition to NCLT under the proviso to Section 434(1)(c) of the Companies Act, directing that the Official Liquidator's report and objections be considered by the NCLT. It also considered provisions of the IBC, inter alia Section 18(b) (duty of Interim Resolution Professional to receive and collate claims), and the CIRP Regulations concerning submission and verification of claims.

Interpretation and reasoning

The Tribunal observed that, by the Supreme Court's transfer order, adjudication of the appellant's claims moved from the Companies Act (winding up) regime to the IBC regime. The Adjudicating Authority's order dated 05.10.2023 expressly held that, after commencement of CIRP and publication of Form A, it was the appellant's responsibility to file its claim afresh with the Resolution Professional in the prescribed form, irrespective of prior filing and partial admission by the Official Liquidator in liquidation. This order also recorded that, after transfer, the matter had to be dealt with under the IBC and not as a continuation of winding up. The Tribunal held that this order, not having been challenged, had attained finality and governed the manner in which the appellant's claim had to be processed.

At the same time, the Supreme Court's transfer order required that the Official Liquidator's report and the objections thereto be "considered" by the NCLT. The Tribunal emphasised that this did not exempt the Resolution Professional from examining the Official Liquidator's report. The report, after detailed scrutiny of voluminous records, had admitted expenditure of Rs. 57.86 lakhs and rejected the balance, including interest claims, with reasoning (absence of supporting delivery receipts, inconsistency and exaggeration in interest calculations, and lack of stipulation for interest in the scheme).

The Tribunal held that, while the RP had to verify and collate claims under IBC, the Official Liquidator's report-particularly its careful segregation between admissible and inadmissible components-was a relevant and reasoned material that ought to have been considered and either accepted or rejected with reasons. It could not be summarily ignored merely because it was prepared under the Companies Act regime.

Conclusions

(a) After transfer to NCLT, adjudication of the appellant's claim was required to be effected under the IBC and CIRP framework; a fresh claim in prescribed form had to be filed with the RP, independent of earlier liquidation filings.

(b) The Official Liquidator's report was not binding as such but was a material document that the RP and Adjudicating Authority were required to meaningfully consider; its outright disregard without reason was not justified.

Issue (4): Legality of the RP's rejection of the claim and treatment of interest and proof of expenditure

Legal framework discussed

The Tribunal noted the obligations of the RP under the IBC and CIRP Regulations, particularly regarding receipt, verification and collation of claims, and the need for sufficient evidentiary support (vouchers, invoices, bank statements, proof of disbursement) to substantiate a claim. It also referred to Regulation 13 of the CIRP Regulations as invoked by the appellant, and to jurisprudence recognising that an RP must exercise due diligence in verifying claims.

Interpretation and reasoning

On delay, the Tribunal recorded that CIRP had commenced in July 2022, with last date for filing claims being 01.08.2022, and that the appellant did not file a claim within that period, despite knowledge of proceedings. The appellant filed only after the Adjudicating Authority's order dated 05.10.2023 and further reminders, and had to rectify the form. The Adjudicating Authority treated this as a "considerable delay."

On substantiation, the RP's stand was that the appellant did not furnish adequate bank statements, proof of disbursement, or invoices linked to the corporate debtor; many invoices were not addressed to the corporate debtor and were allegedly frivolous or unrelated, and the interest claim (about Rs. 243 crores on Rs. 2.15 crores principal) had no contractual foundation.

The appellant countered that all originals had already been lodged with the Official Liquidator and then handed over to the RP; insisting on originals from the appellant was impossible. The Tribunal noted letters from the Official Liquidator to the RP, and an Adjudicating Authority order dated 20.03.2023 recording that all documents relating to the matter had been handed over to the RP. The Tribunal found no challenge to this order and was not persuaded by the RP's denial of receipt of original records. It considered the RP's insistence on originals from the appellant to be unreasonable in this factual context.

Crucially, however, the Tribunal placed weight on the Official Liquidator's prior detailed adjudication: acceptance of Rs. 57.86 lakhs as properly supported by vouchers/invoices, and rejection of the remaining principal and of the entire interest claim as inadequately supported, beyond scope, or exaggerated. It noted that the appellant had not successfully established any contractual or judicial basis for interest, and that earlier Supreme Court orders did not recognise or determine any interest entitlement. Hence, reliance on restitution principles in other judgments to claim a very high interest amount was held to be misplaced.

The Tribunal held that the RP ought to have clearly articulated reasons, in light of the Official Liquidator's report and the material said to be in his possession, for accepting or rejecting the respective components of the claim, instead of treating the entire claim as unsubstantiated. At least to the extent of Rs. 57.68 lakhs already examined and admitted by the Official Liquidator, the report was found reasonable and deserving of cognisance.

Conclusions

(a) The RP was entitled to require substantiation of the claim and to reject unsupported or frivolous components, particularly as to interest and unproved invoices.

(b) However, in the factual context-especially with the Official Liquidator's reasoned admission of Rs. 57.68 lakhs and transfer of originals to the RP-the RP ought to have considered and dealt specifically with the Official Liquidator's findings rather than disregarding them wholesale.

(c) The interest claim was rightly liable to rejection; there was no contract or judicial order granting interest and the Official Liquidator had already found the interest component untenable.

Issue (5): Effect of rejection/non-admission of the claim on validity of the resolution plan; material irregularity, prejudice, and CoC's commercial wisdom

Legal framework discussed

The Tribunal considered:

* Section 30(2)(b) of the IBC (minimum payment of liquidation value to operational creditors);

* Regulation 38 of the CIRP Regulations (treatment of stakeholders and timing of payments to operational creditors);

* Section 53 IBC (waterfall mechanism, referred to as being followed in plan design);

* Section 61(3) IBC (limited grounds of appeal against approval of a resolution plan, including contravention of law and material irregularity by the RP);

* Supreme Court jurisprudence affirming the primacy and non-justiciability of CoC's "commercial wisdom," and limiting judicial interference to violations of Section 30(2) or Section 61(3).

Interpretation and reasoning

The appellant argued that the Adjudicating Authority could not lawfully approve the resolution plan without first adjudicating the challenge to the RP's rejection of its claim, and that this failure constituted material irregularity undermining the CIRP's sanctity. The RP and Successful Resolution Applicant argued that admitting such belated claims post-approval would disrupt a fully implemented plan and contravene the finality sought under IBC jurisprudence.

The Tribunal examined the treatment of stakeholders in the resolution plan as recorded in Form H. The plan provided 100% payment of admitted amounts to secured financial creditors and to government operational creditors. Under the same plan, operational creditors "other than" government, employees and workmen (a category in which the appellant would fall) were allocated "Nil" in terms of amount provided, with liquidation value for them effectively treated as Nil.

On this basis, the Tribunal reasoned that, even if it were assumed that the RP had wrongly rejected the appellant's claim, the structure of the approved plan-backed by the CoC's commercial wisdom-contemplated no distribution to that class of operational creditors. Hence, even if the claim had been admitted, the appellant would not, under the plan, have been allotted any amount. The appellant, therefore, suffered no prejudice in terms of distributions under the resolution plan, and there was no violation of Section 30(2)(b), since at least liquidation value (here effectively Nil) was being given to that class.

The Tribunal reiterated that interference with the CoC's commercial decision is permitted only if a plan contravenes Section 30(2) or falls within the grounds specified in Section 61(3), such as material irregularity or non-provision for operational creditors' dues. In the present case, the plan had been approved by 100% CoC vote, all mandatory statutory requirements were complied with, and the claim structure showed no illegality or discrimination contrary to the Code. The mere dissatisfaction of the appellant as a stakeholder could not justify upsetting the plan.

The Tribunal therefore concluded that the approval of the resolution plan was not vitiated by any material irregularity on account of the treatment of the appellant's claim, especially when the CoC had consciously decided not to allocate any amount to that operational creditor category, and such decision was within its commercial domain.

Conclusions

(a) Even assuming some infirmity in the RP's rejection of the appellant's claim, no prejudice arose under the resolution plan, as the CoC-approved plan allocated Nil to that class of operational creditors consistent with the liquidation value and waterfall structure.

(b) There was no contravention of Section 30(2)(b) IBC, nor any material irregularity under Section 61(3) in the approval of the plan.

(c) The plan, having been approved with 100% CoC vote and implemented in accordance with its terms, could not be disturbed merely because the appellant's claim had been rejected.

(d) The Tribunal affirmed the approval of the resolution plan and declined to interfere with the CoC's commercial wisdom.

Issue (6): Equitable relief regarding Rs. 57.68 lakhs admitted by the Official Liquidator and the Successful Resolution Applicant's offer

Interpretation and reasoning

The Tribunal noted that, during the hearing, the Successful Resolution Applicant voluntarily offered to pay Rs. 57.68 lakhs to the appellant-corresponding to the amount earlier admitted by the Official Liquidator-without altering the total plan value or disturbing proceeds already earmarked for creditors. The offer was made on the condition that the appellant would not press further claims.

The Tribunal found the Official Liquidator's adjudication, to the extent of Rs. 57.68 lakhs, to be reasonable and deserving of recognition, and viewed the Successful Resolution Applicant's offer as a "practical suggestion" capable of bringing finality to long-standing litigation. In balancing the equities and "securing the ends of justice," the Tribunal decided to modify the impugned order partially to permit such payment while safeguarding the integrity of the resolution plan and its distribution structure.

Conclusions

(a) The affirmation of the resolution plan was maintained in full; the Successful Resolution Applicant was allowed to reimburse Rs. 57.68 lakhs to the appellant, corresponding to the amount admitted in liquidation by the Official Liquidator.

(b) This payment is to be made within 30 days from the date of the appellate order, and must not affect the overall proceeds of distribution already approved for other creditors under the plan.

(c) The payment is conditional on the appellant agreeing not to press any further claims or interest, and on such other mutually acceptable terms and conditions as the parties may agree.

(d) Other than this limited relief, the dismissal of the appellant's wider claim and the approval of the resolution plan stand confirmed.

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