NCLAT Orders Fresh Review of Rejected Form C Claim, Criticises Casual Approach in CIRP Limitation, Insurance Issues

The NCLAT set aside the adjudicating authority's order rejecting the applicant's Form C claim in the CIRP of the CD and remanded the matter for fresh consideration. It held that the NCLT had adopted a casual approach by upholding the RP's rejection of the claim as time-barred without examining relevant dates, correspondence, evidence, or the clauses of the buyer insurance policy. The Tribunal found that no reasoned analysis was undertaken on limitation or on the alleged unjust enrichment from indemnity received under the foreign insurance coverage. With both respondents conceding remand was appropriate, the NCLAT directed the NCLT to reconsider all issues afresh on merits.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the adjudicating authority was justified in upholding the resolution professional's partial admission of the appellant's claim by holding, inter alia, that the claim was barred by limitation.

1.2 Whether the adjudicating authority erred in deciding on limitation and admissibility of the claim without considering the relevant dates, documents, and clauses of the buyer credit guarantee / insurance policy.

1.3 Whether, in the circumstances, the matter required remand to the adjudicating authority for fresh consideration of the appellant's claim.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Justification of the adjudicating authority's order on limitation and partial admission of claim; failure to consider relevant materials

Interpretation and reasoning

2.1 The Tribunal noted that the appellant had filed a financial creditor's claim in Form C which was partly admitted by the resolution professional, and that the challenge in the application before the adjudicating authority was to the partial rejection of this claim.

2.2 The adjudicating authority dismissed the application essentially on two grounds: (i) that the claim was beyond limitation as the "date of default and notice have clearly exceeded the period of limitation", and (ii) that proper and complete documents, including details of invocation and realisation under the insurance cover and the clauses of the insurance coverage policy, had not been provided to the resolution professional and to the committee of creditors.

2.3 The Tribunal observed that, while recording that the claim was time barred, the adjudicating authority did not examine or discuss any specific dates of default, notices, filings or any documentary exchanges between the parties. No factual matrix, such as repayment rescheduling, acknowledgments by the corporate debtor, or termination and demand dates, was analysed to support the conclusion on limitation.

2.4 The Tribunal further recorded that the adjudicating authority did not examine or discuss any clauses of the buyer credit guarantee / insurance policy, despite the controversy involving indemnity, subrogation, and alleged "double recovery" from both the insurer (Federal Republic of Germany) and the corporate debtor.

2.5 It was also noted that the adjudicating authority did not explain how, in the background of indemnity already received by the appellant, any claim would amount to unjust benefit, nor how such indemnity interacted with the appellant's contractual rights against the corporate debtor. No clause of the policy available on record was analysed.

2.6 The Tribunal highlighted an internal inconsistency in the approach regarding limitation: if the claim were truly barred by limitation, there was no cogent explanation as to how a part of the same claim could be admitted by the resolution professional, including "even if beyond the period of limitation if claimed under subrogation rights", as mentioned in the impugned order.

2.7 The Tribunal characterised the approach of the adjudicating authority as "casual", noting that the findings on limitation and admissibility were rendered without adequate discussion of facts, documents, or the governing contractual and policy provisions.

Conclusions

2.8 The Tribunal held that the adjudicating authority had not properly examined the issue of limitation, nor had it considered the relevant documents and policy clauses while approving the decision of the resolution professional.

2.9 The finding that the claim was barred by limitation, and the endorsement of the partial rejection of the claim, were held to be unsustainable, warranting interference.

Issue 3: Necessity of remand for fresh consideration

Interpretation and reasoning

3.1 During hearing, counsel for the resolution professional and for the successful resolution applicant fairly submitted that, in view of the deficiencies in the impugned order, it would be appropriate to remand the matter to the adjudicating authority for fresh decision.

3.2 The Tribunal concurred that, since the adjudicating authority had not discussed the factual matrix or the policy clauses, and had not cogently addressed the issues of limitation, admissibility, indemnity, and subrogation, a fresh consideration on merits was required.

3.3 The Tribunal also took note that an approved resolution plan existed, and had already directed that any distribution under the plan would abide by the result of the appeal, thereby preserving the effect of a future correct determination of the appellant's claim.

Conclusions

3.4 The impugned order dismissing the appellant's application was set aside.

3.5 The application challenging the partial rejection of the claim (IA No. 997/NCLT/AHM/2020) was revived and remanded to the adjudicating authority for fresh disposal on merits.

3.6 The adjudicating authority was directed to provide reasonable opportunity of hearing to all parties and to make sincere efforts to dispose of the application within two months from the first appearance of the parties.

3.7 Parties were directed to appear before the adjudicating authority on the specified date, and no order as to costs was made; all pending interlocutory applications were disposed of.

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