NCLAT Delhi: Belated Claims By Creditors Not To Be Considered Given The Time-Bound Nature Of IBC proceedings
The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Arun Baroka (Technical Member) held that the belated claims by creditors cannot be considered given the time-bound nature of Insolvency and Bankruptcy Code, 2016 ('IBC') proceedings. Background Facts: In 2019, Dream Procon Pvt. Ltd. (Corporate Debtor) entered into...
The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Arun Baroka (Technical Member) held that the belated claims by creditors cannot be considered given the time-bound nature of Insolvency and Bankruptcy Code, 2016 ('IBC') proceedings.
Background Facts:
In 2019, Dream Procon Pvt. Ltd. (Corporate Debtor) entered into the Corporate Insolvency Resolution Process ('CIRP') and Mr. Nilesh Sharma was appointed as the Resolution Professional ('RP'). Victory Ace Social Welfare Society, an association of homebuyers, has been selected as the Successful Resolution Applicant ('SRA') and the resolution plan has been approved by the Committee of Creditors ('CoC') with 90.66% voting share on 06.09.2019. The resolution plan is pending approval of the Adjudicating Authority.
On 20.07.2021, Ms. Pooja Mehra (Appellant) submitted the claim with a delay of 552 days, however, the same has been rejected by the RP. NCLT Delhi via its Order dated 11.08.2023 rejected the application filed by the Appellant seeking condonation of delay in filing the claim in the category of 'Financial Creditor' and passing a direction to admit the claim before the RP. The Appellant has filed the appeal against the said NCLT Delhi Order.
NCLAT Verdict:
The NCLAT Delhi dismissed the appeal and held that the belated claims by creditors cannot be considered given the time-bound nature of IBC proceedings.
The Appellate Tribunal held that a person who sleeps over their rights should not be given the indulgence of condonation of delay and observed:
“The appellant was sleeping over his rights. A person who sleeps over his rights ought not to be given any indulgence. Close to 3 years had passed since the commencement of Corporate Insolvency Resolution Proceedings (CIRP) of Dream Procon Pvt Ltd and the applicant never showed any interest in the flat purchased by him. The proceedings under IBC are time bound and the belated claim of the applicant cannot be considered and is liable to be rejected.”
The Appellate Tribunal placed reliance on Regulation 12(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 to understand the time limits available for filing of claims.
“12(1)- Submission of proof of claims: A creditor shall submit a claim with proof on or before the last date mentioned in the public announcement. Provided that a creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit his claim with proof to the interim resolution professional or the resolution professional, as the case may be, up to the date of issue of request for resolution plans under regulation 36B or ninety days from the insolvency commencement date whichever is later: Provided further that the creditor shall provide reasons for delay in submitting the claim beyond the period of ninety days from the insolvency commencement date”
It noted that presently, the date of the request for resolution plans was issued before the CoC approved the resolution plan. NCLAT observed that even if a later date is considered, which exceeds 90 days, the Appellant's claim cannot be accepted since it was filed after the CoC approved the Resolution Plan.
NCLAT observed that the recent Supreme Court judgment in M/s RPS Infrastructure Ltd. V. Mukul Kumar & Anr cannot be interpreted to suggest that its principles apply solely to belated claims filed by commercial entities. It clarified that the ruling's applicability isn't restricted based on whether the claimant is a commercial or non-commercial entity. The essence of the ruling remains consistent across all cases of belated claims, regardless of the nature of the claimant, as argued by the Appellant during the hearing.
The Appellate Tribunal pointed out that presently, belated claims have been entertained within 90 days, including those with information in the customer relationship management database, even if formal claims were not filed. However, the Appellant submitted their claims after a lapse of 540 days, well beyond the stipulated time frame under Section 15 of the IBC and approximately two months after the CoC's approval of the plan.
It held that given the time-bound nature of the IBC proceedings, the Appellant should not be permitted to reopen the matter and potentially introduce numerous undecided claims, disrupting the resolution process. The RP cannot entertain the Appellant's belated claim after the resolution plan approval.
It also held that mere non-approval of the Resolution Plan by the Adjudicating Authority cannot serve as grounds for considering the Appellant's claim. Moreover, the Adjudicating Authority lacks the power to alter the commercial terms of the resolution plan after the CoC's approval as per Section 31(1) of the IBC.
In conclusion, NCLAT upheld NCLT Delhi's decision rejecting the belated claim as it aligns with the time-bound nature of CIRP proceedings.
Case Title: Pooja Mehra vs. Nilesh Sharma and Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 1511 of 2023
Counsel for Appellant: Mr. Vaibhav Mahajan and Ms. Harshita Aggarwal, Advocates.
Counsel for Respondent: Ms. Varsha Banerjee, Ms. Mahima Ahuja, Advocates for RP Mr. Parth Bhatia, Mr. Prithu Garg, Mr. Shivam Singh, Advocates for R2-SRA.