NCLAT Rules Post-CIRP Claims Cannot Be Entertained By Resolution Professional

NCLAT Rules Post-CIRP Claims Cannot Be Entertained By Resolution Professional

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Mr. Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member), and Mr. Indevar Pandey (Technical Member), has ruled that any claims arising after the commencement of the Corporate Insolvency Resolution Process (CIRP) cannot be entertained by the Resolution Professional (RP).

Gujarat Urja Vikas Nigam Limited (Appellant), a Government of Gujarat undertaking involved in the bulk purchase and sale of power on behalf of state-owned distribution licensees in Gujarat, entered into a Power Purchase Agreement (PPA) with Adel Landmarks Private Limited (Corporate Debtor) in 2007 for a wind power project. The corporate debtor allegedly defaulted on power supply obligations since March 2015. As a result, the appellant issued a default notice and a termination notice, seeking compensation of Rs. 3.36 Crores. However, no response was received from the corporate debtor.

In the meantime, Edelweiss Asset Reconstruction Company, a financial creditor, initiated CIRP against Adel Landmarks by filing a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC). On December 5, 2018, the National Company Law Tribunal (NCLT), Delhi, commenced CIRP against the corporate debtor, imposing a moratorium under Section 14 of the IBC. During the moratorium, the appellant pursued its claims before the Gujarat Electricity Regulatory Commission (GERC), unaware of the ongoing CIRP.

After becoming aware of the CIRP proceedings in January 2022, the appellant withdrew its petition from the GERC and later approached the NCLT, Delhi, seeking a reconsideration of its claim. However, the NCLT rejected the application, as the claim was filed after the initiation of the CIRP.

The appellant argued that the termination of the PPA was valid due to the corporate debtor’s default and claimed that Section 14 of the IBC did not prevent such termination. It further contended that its claim arising after the CIRP should not be deemed discharged and that it was entitled to file its claim before the approval of the resolution plan.

The RP argued that under the IBC, termination of any rights under the PPA was barred during the CIRP. The RP also pointed out that claims could only be entertained if filed before the CIRP commencement date, in accordance with CIRP regulations. Since the appellant filed its claim after a delay of 849 days, the RP argued that the claim could not be considered.

The NCLAT noted that the appellant could not plead ignorance of the CIRP proceedings, as public announcements were made. It was observed that the appellant terminated the PPA during the moratorium, which was prohibited under Section 14 of the IBC. The Tribunal emphasized that licenses, permits, and other rights granted to the corporate debtor could not be suspended or terminated due to insolvency during the moratorium.

The NCLAT upheld the NCLT's decision, stating that claims arising after the CIRP commencement date cannot be entertained by the RP. The Tribunal ruled that the RP is only authorized to verify claims as of the CIRP date, and any subsequent claims must be pursued through other legal remedies.

In conclusion, the Tribunal held that the RP was correct in rejecting the appellant's claim, as it arose after the initiation of the CIRP, and affirmed the NCLT’s decision.