NCLAT Delhi Upholds Subsequent Reduction Of Claim By The IRP, Based On An Arbitral Award

Background Facts

Intec Capital Ltd. (“Financial Creditor/Appellant”) filed a petition under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking to initiate Corporate Insolvency Resolution Process (“CIRP”) against Atharva Auto Logistics Pvt. Ltd. (“Corporate Debtor”).

The Corporate Debtor was admitted into CIRP on 18.02.2022 and Mr. Uday Kumar Bhaskar Bhat was appointed as the Interim Resolution Professional (“IRP”).

The Financial Creditor filed its claim amounting to Rs. 6,52,42,330/-, which was provisionally admitted by the IRP on 18.03.2022. After verification of claims, the IRP reduced the claim amount to Rs.3,16,90,306/-. Aggrieved by the reduction of the claim amount, the Financial Creditor filed an application before the NCLT.

The NCLT observed that the Financial Creditor had disbursed a loan of Rs. 1.3 Crores to the Corporate Debtor. Thereafter, the Financial Creditor referred the dispute with respect to the loan to arbitration. An Arbitral Award was passed on 19.01.2018 for a sum of Rs. 1,35,35,770/-, alongwith pending and future interest at the rate of 19% per annum, to be paid by the Corporate Debtor.

The NCLT dismissed the application and held that the claim amount mentioned in the Section 7 petition cannot be taken as final amount for determining the voting percentage of the Creditor. The IRP has calculated the interest on the principal amount of Rs. 1,35,35,777/- as given in the Award. The NCLT dismissed the application and upheld the subsequent reduction of claim amount by the IRP.

The Financial Creditor challenged the order of NCLT before the NCLAT and argued that the Resolution Professional has no jurisdiction to change/reduce the claim amount after he has once admitted the claim.

Relevant Law

Regulation 14(2) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) Regulations, 2016

“14. Determination of amount of claim.

(1) Where the amount claimed by a creditor is not precise due to any contingency or other reason, the interim resolution professional or the resolution professional, as the case may be, shall make the best estimate of the amount of the claim based on the information available with him.

(2) The interim resolution professional or the resolution professional, as the case may be, shall revise the amounts of claims admitted, including the estimates of claims made under sub-regulation (1), as soon as may be practicable, when he comes across additional information warranting such revision.”

NCLAT Verdict

The Bench observed that the claim amount of Rs. 6,52,42,330/- was only provisionally admitted by the IRP and the same was subject to verification. Under CIRP Regulations, 2016, the Resolution Professional is empowered to change the claim amount in the event any additional material comes into picture. The Bench observed as under:

“The Resolution Professional has calculated the claim of the Appellant as per the award dated 19.01.2018. Appellant who has himself initiated the Arbitration Proceeding cannot deny that he is bound by the award which was delivered in his favour. Claim calculated on the basis of the award can neither be said to be incorrect nor against the materials on record.”

It was held that the Resolution Professional had rightly reduced the claim amount of the Financial Creditor. The appeal has been dismissed.

Case Title: Intec Capital Ltd. v Uday Kumar Bhaskar Bhat

Case No.: Company Appeal (AT) (Insolvency) No.361 of 2023.

Counsel For the Appellant: Mr. PBA Srinivasan, Mr. Dhruv Parwal, Mr. V. Aravind, Ms. Srishti Bansal, Mr. Sumit Swami, Advocates.

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