Relief U/S 60(5) Of IBC Against Rejection Of Claims By Liquidator Cannot Be Sought When Remedy U/S 42 Is Not Exhausted: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that relief under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (Code) cannot be claimed against rejection of claims by the liquidator when the remedy provided under section 42 of the code against such decision has not been resorted to. Brief Facts: The Corporate Debtor-M/s Varun Resources Ltd. was admitted into Corporate Insolvency Resolution Proceeding (“CIRP”) on 14.06.2017. On the request of the Resolution Professional (“RP” in short), Asean International Limited (Appellant) supplied bunkers, fuels, fresh water, oil etc. to three vessels owned by the Corporate Debtor from 23-27 July 2017 besides also procuring the same from certain sub-contractors namely Gujarat Marines and Dushyant Patel. When no resolution plan was submitted, the corporate debtor was ordered to be liquidated. The Appellant filed their claim belatedly before the Liquidator on 22.03.2019. The Liquidator rejected the claim on 30.03.2019 on the ground that the claim was submitted beyond two months from the last date fixed for submission of claim as per Public Announcement. On 30.09.2022, the Respondent-Liquidator sent a communication to the Appellant informing that their sub-contractors-Gujarat Marines and Dushyant Patel had filed a case in the Admiralty Court towards recovery of money for the supplies made. The Liquidator in their communication requested the Appellant to provide No objection certificate (NOC) so that the claims of the sub-contractors could be settled separately from that with the Appellant. On 27.03.2023, the Appellant filed an Interlocutory Application (IA) under Section 60(5) of the Code challenging the communication of the Liquidator dated 20.02.2023 seeking NOC. On 17.10.2023, the Adjudicating Authority passed the impugned order rejecting the IA. Aggrieved by this order, the present appeal has been preferred. Contentions: The appellant submitted that since the invoices provided for interest clause for delayed payment and the invoices had been accepted by the Liquidator without objection, the Appellant was entitled to payment of the sum including interest on delayed payment as reflected in the invoice The NCLAT in Prashant Agarwal Vs Vikash Parasrampuria & Anr. held that interest on delayed payment as specified in the invoice entitles the creditor to a right to payment under Section 3(6) of the code. It was also argued that since the supply was made by the Appellant on request of the Corporate Debtor through the RP during CIRP to keep the Corporate Debtor as a going concern, the expenditure incurred on the supplies qualified as CIRP costs. Per contra, the respondent submitted that once the claim of a creditor is rejected in the liquidation proceedings, the creditor is not entitled to any claim in the waterfall mechanism. It was further argued that the interest component was never agreed between the parties nor had the Appellant claimed interest in their claim advanced at the time of filing their belated claim before the Liquidator on 22.03.2019. The claim for interest in the present case was made much later. Observations: The Tribunal noted that judgment of this Tribunal in Prashant Agarwal supra that interest on delayed payment if specified in the invoice entitles the creditor to a right to payment does not come to the rescue of the Appellant. It further added that in this case the Appellant had themselves clearly failed to file their claim by including interest on account of delayed payment within the time line laid down in terms of Regulation 16 of Liquidation Process Regulations on account of which the claims were rejected by the liquidator. It agreed with the submission of the respondent and observed that the Appellant having once filed their claim amount without interest by their own volition, they cannot question the non-inclusion of interest after efflux of such a long period of time. The Tribunal referred to section 42 of the code and observed that as per this provision the liquidator is entitled to examine the claims of the creditors. The creditors can challenge the decision of the liquidator of either accepting or rejecting the claims within 14 days. Any dispute arising between the stakeholder claimant and the liquidator shall be adjudicated by the Adjudicating Authority. Based on the above, it observed that the Appellant in this case had not only failed to file their claim before the Liquidator on time but even when their belated claim was rejected by the Liquidator, the Appellant did not take any steps to challenge the decision of the Liquidator. It further said that when section 42 of the code provided a clear remedy against the rejection or acceptance of the claims ...

Relief U/S 60(5) Of IBC Against Rejection Of Claims By Liquidator Cannot Be Sought When Remedy U/S 42 Is Not Exhausted: NCLAT

Mohd Malik Chauhan

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Mohd Malik Chauhan

Relief U/S 60(5) Of IBC Against Rejection Of Claims By Liquidator Cannot Be Sought When Remedy U/S 42 Is Not Exhausted: NCLAT

Mohd Malik Chauhan

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