2026 (1) TMI 56 - AT - IBC

Alleged loan agreement claim in CIRP challenged as bogus due to defective documents; rejection upheld, appeal dismissed.

The dominant issue was whether a creditor's claim in CIRP, founded on an alleged loan agreement, was genuine. The tribunal held that serious ... Rejection of claims of the Appellants in the Corporate Insolvency Resolution Proceedings of the Corporate Debtor - case of the Appellant is that the Adjudicating Authority had erroneously rejected their claim by treating them as delayed - HELD THAT:- The stamp paper on which the Loan agreement was executed does not carry the stamp of the licensed vendor, serial number and date of purchase. Clearly, therefore, the Stamp Paper was not obtained from regular, identifiable, authorised or verifiable sources. Further, no material has been placed on record to show that there was any formal authorisation from the Corporate Debtor by way of Board Resolution for execution of the Loan Agreement for any signatory to execute the Loan Agreement on their behalf. The Corporate Debtor had also allegedly not submitted the original Loan Agreement with the RP. All these factors, seen cumulatively, casts a shadow of doubt on the authenticity and bonafide of the Loan Agreement. Hence, NCLAT is inclined to agree with the Respondents that there existed substantial and compelling grounds for the Adjudicating Authority to have exercised its inherent powers bestowed under Rule 11 of the NCLT Rules to look into the authenticity of the Loan Agreement as denoted at para 13 of the impugned order. The Appellant was admittedly a shareholder of the Corporate Debtor when the Loan Agreement was signed in 2007 and later became one of the Directors of the Corporate Debtor from 2009-2012. Thus, it is undisputable that the Appellant was very much in control of the management of the Corporate Debtor until 2012. We also notice that either the Appellant or his brother who was a signatory of the Loan Agreement remained at the helm of affairs of the Corporate Debtor all along. That being the case, the Appellant cannot absolve itself of the responsibility of explaining as to why the financial statement of the Corporate Debtor did not reflect levy of interest till FY 2011-12 even when they were in control of the Corporate Debtor - The Adjudicating Authority, at best, had a limited jurisdiction to examine the decision of the RP on the rejection on the claim and not on the reasonability of computation of the claim or quantum of the debt. There are substance in the contention raised by the Respondents that the claim filed by the Appellant was not bonafide as it was not premised on a genuine loan transaction and was bereft of cogent supporting proof - there are no error on the part of the Adjudicating Authority in passing the impugned order rejecting the claims filed by the Appellant. Rejection of claim on the ground of time limitation - HELD THAT:- There was no delay as such in filing of claims by the Appellant as the RP had invited the claims with effect from 24.02.2022 which date fell within the period 15.03.2020 to 28.02.2022 and therefore the Appellant was clearly entitled to the benefit of Para (III) of the orders of the Hon’ble Supreme Court in Suo Motu Writ Petition (Civil) No. 3 of 10.01.2022 [2022 (1) TMI 385 - SC ORDER]. In fact, after considering IA No 2768 of 2022, the Adjudicating Authority on 22.12.2023 in pursuance of the Suo Moto order had held the claim to not barred by limitation and directed the RP to verify the claim on merit. In such circumstances, for the Adjudicating Authority to now having taken the stand that the claim was inadmissible on grounds that it was belated and hit by limitation lacks foundation. There are substance in the contention raised by the Respondents that the claim filed by the Appellant was not bonafide and hence the rejection of the claims filed by the Appellant company by the Adjudicating Authority is sustainable in the eyes of law. There are no infirmity in the impugned orders - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the claims filed after the public announcement were barred by limitation, or were within time by application of the Supreme Court's COVID limitation exclusion (including the 90-day period from 01.03.2022). 2. Whether the Adjudicating Authority, while dealing with an application challenging rejection of claims, could examine the claim documents and reject the claims on merits (including authenticity/tenability of the 'Loan Agreement') rather than confining itself only to limitation. 3. Whether, on the material produced, the amounts claimed were established as genuine loan transactions constituting 'financial debt', or were unsupported/suspicious advances not qualifying for admission as financial creditor claims. 4. Whether the long, unexplained inaction in seeking repayment and absence of supporting financial indicia (including classification in accounts) justified treating the claims as non-bona fide and rejecting them. ISSUE-WISE DETAILED ANALYSIS Issue 1: Limitation/timeliness of filing of claims Legal framework: The Court applied the Supreme Court's limitation exclusion directions (COVID period) as invoked in the judgment and specifically relied on the portion granting at least 90 days from 01.03.2022 where limitation would have expired during 15.03.2020-28.02.2022. Interpretation and reasoning: Since the invitation of claims/public announcement date fell within the excluded period, the claim submissions on 27.05.2022 were treated as within the extended period contemplated by the Supreme Court directions. Consequently, the Court held there was no 'delay' requiring a condonation application. Conclusions: The Court concluded the claims were not barred by limitation and were not belated merely on account of the filing date. In the second matter, it further held that treating the claim as belated lacked foundation, particularly because an earlier order had already held the claim not barred and had directed verification on merits. Issue 2: Scope of scrutiny by the Adjudicating Authority-limitation only vs. merits of the claim documents Legal framework: The Court considered the statutory scheme placing a duty on the IRP/RP to verify claims and the regulations referred to in the judgment requiring submission of proof and permitting the RP to seek clarification and verify authenticity/accuracy. It also relied on the Adjudicating Authority's inherent powers (as discussed in the judgment) to prevent abuse of process and meet ends of justice. Interpretation and reasoning: The Court rejected the contention that the Adjudicating Authority had to confine itself to limitation. It noted the claimant's own prayer seeking any other fit/proper orders enabled holistic consideration. While accepting that disputes of fraud/forgery in contractual documents cannot be finally tried in summary jurisdiction, the Court held that it was still permissible and necessary, within the IBC claim-verification construct, to look at the supporting documents to assess authenticity, accuracy, and tenability for admission of a claim. Conclusions: The Court upheld the Adjudicating Authority's approach in examining the loan documentation and surrounding material to determine whether the claim was bona fide and admissible, and held there was no jurisdictional overreach in undertaking such scrutiny for claim admission purposes. Issue 3: Whether the transactions were proved as genuine loans/financial debt Interpretation and reasoning (first claim): The Court affirmed findings that the loan document carried significant authenticity defects (including deficiencies on stamp paper such as absence of vendor stamp/serial number/date of purchase and lack of proof of authorised execution). It also found no material showing formal authorisation by the corporate debtor for execution. Separately, it examined the audited balance sheet classification and held that the amount appeared under 'Other Advances' within 'Other Long Term Liabilities', not under 'Long Term Borrowings', indicating it was treated as an advance/liability and not as borrowing/loan, thus not exhibiting the character of financial debt. Interpretation and reasoning (second claim): The Court identified serious date inconsistencies within the loan documentation (different execution dates, stamp paper date mismatch, disbursal date preceding stated execution) and noted that the alleged addendum correcting discrepancies was not produced at the stage of claim submission. These were treated as undermining credibility and indicating possible interpolation/backdating. It also relied on the corporate debtor's audited balance sheet showing the amount under 'Other Advances' (not loan) and additionally noted the claimant's own audited balance sheet reflecting it as 'Trade Receivables,' reinforcing that the claim did not stand as a loan in the records. Conclusions: On both claims, the Court held the materials did not establish a genuine loan/borrowing transaction supporting admission as a financial creditor claim, and the documentary and accounting treatment supported rejection. Issue 4: Effect of prolonged silence/non-demand and lack of supporting indicia on bona fides Interpretation and reasoning: The Court treated the prolonged absence of any repayment demand or recovery effort for about 15 years as a significant circumstance casting doubt on legitimacy and bona fides. It also relied on lack of corroborative indicia in the records (including absence of reflected interest provisioning and other supporting entries) to conclude the claims appeared to be raised as an afterthought coinciding with commencement of insolvency proceedings. While acknowledging that an interest-free loan can still be financial debt, the Court held that, in the present facts, the overall conduct and lack of supporting proof undermined the claims irrespective of the interest component. The Court also clarified that the Adjudicating Authority's rejection could not rest merely on the 'exorbitant' nature of claimed interest, because assessing reasonableness/quantum was beyond the limited scope; however, this did not affect the ultimate sustainability of rejection on other grounds. Conclusions: The Court concluded the claims were not bona fide, were unsupported by cogent material, and were rightly rejected; therefore, the impugned orders dismissing the applications and rejecting the claims were affirmed, and both appeals were dismissed.