NCLT rules no claims can be accepted after approval of Resolution Plan by CoC
Explains that allowing such rights at a later stage could disrupt the time-bound process
NCLT rules no claims can be accepted after approval of Resolution Plan by CoC Explains that allowing such rights at a later stage could disrupt the time-bound process The Mumbai bench of the National Company Law Tribunal (NCLT) has dismissed an application filed by Suraksha Realty Limited on its claim of Rs.19.93 crores as a financial debt under Section 5(8) of the Insolvency and...
NCLT rules no claims can be accepted after approval of Resolution Plan by CoC
Explains that allowing such rights at a later stage could disrupt the time-bound process
The Mumbai bench of the National Company Law Tribunal (NCLT) has dismissed an application filed by Suraksha Realty Limited on its claim of Rs.19.93 crores as a financial debt under Section 5(8) of the Insolvency and Bankruptcy Code (IBC), That’s because the claim was based on a loan and a share pledge agreement.
The Coram of Kuldip Kumar Kareer (judicial member) and Anil Raj Chellan (technical member) while adjudicating an application filed in the Suraksha Realty Limited vs. Anuj Bajpai case, held that no claims could be entertained after the approval of the Resolution Plan by the Committee of Creditors (CoC), as allowing such claims at a later stage could disrupt the entire time-bound resolution process.
On 31 December 2019, the Corporate Insolvency Resolution Process (CIRP) was initiated against Panache Aluminium Extrusions Pvt. Ltd. (corporate debtor), and Anuj Bajpai was appointed as the Resolution Professional (RP).
The matter dates to 2013 when the applicant provided financial assistance of Rs.3 crores for an interest rate of 15 percent p.a to the corporate debtor and its group company as a co-borrower. In 2018, the applicant demanded a payment of Rs.9.30 crores from the corporate debtor and co-borrower. He warned of invoking the ‘Share Pledge Agreement’ if the payment was not made. However, he received no payment. Despite being involved parties, the latter asked for loan documents from the applicant.
After the applicant filed a complaint with the Economic Offence Wing, it learned about the corporate debtor's CIRP proceedings. The applicant contended that it was unaware of the proceedings and could not submit its claim as a secured financial creditor. Nevertheless, the outstanding loan amounts and advances from the corporate debtor were recorded in the corporate debtor's records, ledger accounts, and balance sheets, leading the RP to recognize the secured loans and advances.
The applicant argued that the CoC approved the Resolution Plan without considering the outstanding loans and interest owed to the applicant and informing the potential resolution applicants of such claims. It further contended that the corporate debtor continued to make interest payments to it even after the 210-day period following the loan disbursement expiry as specified in the agreement. The interest payments were credited to the applicant's account after a 10 percent TDS deduction. This was confirmed by Form 26AS for the financial years 2013-2014 and 2014-2015.
On the other hand, the RP argued that the applicant's claim was time-barred since it was not submitted within the specified timeline as per Regulation 12 of the Insolvency Resolution for Corporate Persons Regulations, 2016.
He added that once a Resolution Plan was approved by the CoC, no new claims could be considered. The RP submitted the Resolution Plan under Section 30(6) nearly 14 months before the applicant filed its application. He added that the loan became time-barred. It expired in July 2014, as its term was only 210 days.
The RP further stated that IBC did not require notifying every creditor to whom the corporate debtor owed money. He fulfilled the necessary regulations, including making a public announcement. Still, the applicant did not file any claim form with the current application nor provided evidence or financial statement from the corporate debtor to demonstrate that the debt was reflected in the balance sheet and that he should be considered a ‘secured financial creditor’. The RP contended that the applicant did not prove the existence of any mortgage or security from the corporate debtor that would establish a charge in his favor.
Thus, the NCLT dismissed the application and observed that the applicant did not file its claim within the stipulated timeline. The CoC approved the Resolution Plan on 30 March 2021, and as per the ruling of the Supreme Court in the Jaypee Kensington Boulevard Apartments Welfare Association and others vs. NBCC (India) Limited and Others case, no claims could be entertained after the CoC approved the plan. This was because such claims could disrupt the entire time-bound resolution process.
The tribunal also relied on the apex court’s judgment in the Jaypee Kensington Boulevard Apartments Welfare Association and others vs. NBCC (India) Limited and Others case. It emphasized that it was important to adhere to the timelines specified in the IBC and related regulations for the resolution process.
The bench highlighted that if a claim was not made within the stipulated time, it could not be included in the Information Memorandum prepared by the interim RP. A successful resolution applicant should not be burdened with unresolved claims that arise after their Resolution Plan has been accepted. That’s because it would cause uncertainty on the amounts payable by the prospective resolution applicant taking over the business of the corporate debtor.