Late statutory creditor claim after IBC liquidation and s.53 asset distribution-reopening barred; rejection upheld and appeal dismissed.

Whether a belated statutory claim could be entertained after liquidation had attained finality under the IBC was the dominant issue. The Appellate Tribunal held that once assets have been distributed in accordance with the s.53 waterfall and the liquidation stage is concluded, the process cannot be reopened; limitation is integral to liquidation and Regulation 44(1) requires timely completion, precluding interference even on equitable grounds. As the claimant filed its claim long after the invitation period and pursued the appeal after an inordinate delay, the rejection of the claim and refusal to revive the concluded liquidation process were upheld, and the appeal was dismissed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether an application/appeal under Section 42 of the I & B Code, 2016 challenging the liquidator's rejection of a claim can be entertained when filed far beyond the statutory 14-day limitation period, even after accounting for the Covid-19 limitation exclusion period referred to by the Tribunal.

(ii) Whether, after substantial completion of liquidation and distribution of assets under Section 53 and in view of the time-bound nature of liquidation under Regulation 44(1), the liquidation process can be reopened to consider a belated claim and a belated Section 42 challenge.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Maintainability and limitation for Section 42 challenge to rejection of claim

Legal framework (as addressed by the Court): The Court noted that Section 42 provides a remedy against rejection of a claim by the liquidator by approaching the Adjudicating Authority, and that the limitation prescribed is 14 days from receipt of the decision. The Tribunal also considered the Covid-19 limitation exclusions (15.03.2020 to 28.02.2022) while assessing timeliness.

Interpretation and reasoning: The Court accepted the finding that the claim was rejected on 17.02.2020 and that no Section 42 appeal was filed within the prescribed period. Instead, the challenge was instituted only on 19.07.2023, described as a delay of 1243 days. The Adjudicating Authority's computation was upheld: even after granting the Covid-19 exclusion period considered by the Tribunal, the 2023 filing remained barred by limitation. The Court emphasised that the Appellant "slept over" its rights after rejection and did not pursue the statutory remedy within time.

Conclusion: The belated Section 42 challenge filed in 2023 against the rejection dated 17.02.2020 was time-barred and not entertainable; no error was found in the Adjudicating Authority's refusal to condone/entertain the delayed invocation of Section 42.

Issue (ii): Reopening liquidation after distribution and passage of liquidation timelines

Legal framework (as addressed by the Court): The Court relied on the time-bound scheme of liquidation, specifically noting Regulation 44(1) (completion of liquidation within one year) and the distribution mechanism under Section 53, treating limitation and finality as central to liquidation proceedings.

Interpretation and reasoning: The Court affirmed the finding that the claim itself was lodged long after the public notice timeline (stated as delayed by 351 days) and that, by the time the Appellant approached the Adjudicating Authority years later, the liquidation had "substantially progressed" and assets had already been distributed under Section 53. Documents were noted as having been produced to show that the process had crossed the Section 53 distribution stage. The Court accepted the reasoning that, given the statutory emphasis on finality and timelines in liquidation, the process cannot be reopened to accommodate a highly belated claim, particularly when liquidation had been "laid to rest".

Conclusion: Once liquidation had progressed to and past distribution under Section 53 and in light of Regulation 44(1)'s timeline, interference to reopen the liquidation for a belated claim and delayed Section 42 challenge was impermissible. The appeal was dismissed on merits for lack of any apparent error in the impugned order.

---