NCLAT (19.09.2022) in CoC of Associated Décor Ltd. through Union Bank of India Vs. State of Karnataka [Company Appeal (AT)(CH) (Insolvency) No. 160 of 2021] held that;
The definition of ‘Financial Debt’ in Section 5(8) of IBC does not expressly exclude an interest free loan. ‘Financial Debt’ would have to be construed to include interest free loans advanced to finance the business operations of a corporate body.”
The 1st Respondent did not filed the claim before the RP during CIRP period therefore, there was no question of considering the same by the CoC at such a belated stage.
That the claim of the 1st Respondent herein is belated and cannot be considered and the finding of the Adjudicating Authority in directing the RP to place the claim in Form-C before CoC per se illegal and unsustainable accordingly,
There is no such provision that the ‘Interim Resolution Professional’, shall admit the ‘Claim’ without filing a ‘Claim Form’ either in ‘Form-B’ or in ‘Form-C’. Therefore, this ‘Tribunal’, is of the considered view, that the ‘Interim Resolution Professional’, ‘suo-motu’ cannot admit the ‘Claims’ without their being a ‘Claim’ by the ‘Claimants’ viz. ‘Operational Creditors’, ‘Financial Creditors’ and ‘Claims’ by other ‘Creditors’.
Excerpts of the order;
The Present Appeal is filed against the common order dated 28.05.2021 passed by the `Adjudicating Authority’ (National Company Law Tribunal, Bengaluru Bench, Bengaluru) in I.A. No. 85/2021 in C.P. (IB) No.51/BB/2018, whereby the Adjudicating Authority passed a direction that the claim filed by the Respondent/State of Karnataka in Form-C, shall be put up by the RP to the CoC for its consideration.
Brief Facts:
Appellant’s Submissions:
# 2. The Learned Senior Counsel for the Appellant submitted that the Appellant is aggrieved by the common order dated 28.05.2021 limited to I.A. No. 85 of 2021 in C.P. (IB) No.51/BB/2018.
# 3. The Learned Senior Counsel submitted that the Corporate Debtor has approached the 1st Respondent i.e. State of Karnataka on 28.12.2011 availing concessions under the special incentives and concession scheme. The Respondent on 05.06.2012 sanctioned the proposal by granting several incentives and concessions. On 23.06.2013 the 1st Respondent issued a loan eligibility certificate to the unit for a sum of Rs.226.87 crores to the Corporate Debtor as interest free loan subject to the terms and conditions contained in the loan eligibility certificate dated 26.06.2013. The incentives and concessions granted to the Corporate Debtor was entered into an agreement dated 05.08.2013 between the Respondent No.1 and the Corporate Debtor. The Respondent No.1 released interest free loan to the Corporate Debtor against the submission of bank guarantee as security from 2014-2017. The Union Bank of India issued bank guarantee on 19.06.2014 for an amount of Rs.2,75,00,000/- which was due to expire on 18.06.2019.
# 4. It is submitted the CIRP was initiated against the Corporate Debtor vide order dated 26.10.2018 and the RP issued public announcement inviting claims in Form-A from the general public. On the basis of claims received, the RP constituted the CoC comprising of Oriental Bank of Commerce, UBI and Bank of Baroda. It is pertinent to note that no claim was received by the RP from the 1st Respondent. The bank guarantee given by the UBI to the 1st Respondent expired on 19.08.2019 and the RP requested the Respondent No.1 to return the bank guarantee issued by the UBI as the same had expired. The 19th CoC held on 11.02.2020 wherein it was decided to place their resolution plan submitted by Mohammed Enterprises (Tanzania) Limited (METL) to e-vote. Through e-voting conducted from 13.02.2020 to 06.03.2020 the resolution plan of METL was approved by all the member of CoC.
# 5. It is submitted that the Respondent No.1 aware of the insolvency proceedings and averred in the I.A. No. 85 of 2021 filed by them. The Respondent was concerned only about the expired bank guarantee and it requested UBI to renew the expired bank guarantee and continue to send reminder letters for renewal of the expired bank guarantee without acknowledging the insolvency proceedings or even attempting to file a claim with the RP. The Respondent failed to file claim before the RP despite the public announcement issued on 28.11.2018 and thereafter they filed a writ petition in December 2020 before the Hon’ble High Court of Karnataka for reconstitution of CoC after considering its claim and also sought for an interim relief to stay all the proceedings in respect to CIRP and the Hon’ble High Court disposed of the said writ petition vide order dated 04.03.2021. Pursuant to the directions the Respondent filed an I.A. No. 85 of 2021 before the Adjudicating Authority, seeking reliefs as prayed therein.
# 6. It is submitted that each creditor is required to submit its claim with documentary evidence to the RP and the Respondent failed to file claim within the time hence they estopped from seeking admission of its claim. Further, the claim of the Respondent cannot be admitted as a financial debt as the arrangement of the agreement entered into between the parties does not stand the test of being a financial debt under the Code. As stated supra, the IBC does not envisage automatic admission of claim merely because it was reflecting in the financial statements of the Corporate Debtor. The Resolution Professional cannot automatically admit a claim, however, the claimant is required to file a claim form as prescribed under the CIRP Regulations and cannot be dispensed with in any manner.
# 7. Learned Senior Counsel further submitted that the finding of the Adjudicating Authority dispensing with the mandatory requirement of filing a claim because the debt was clearly disclosed in audited financial statements of the Corporate Debtor, is legally untenable. Such a finding should be rejected in toto as the same is against the basic tenets of the code and would lay down a completely wrong precedent leading to failure of the Code in near future. The Learned Senior Counsel emphasises the duties prescribed to be performed by the RP under Section 18 and 21 of the I& B Code, 2016
# 8. In view of the reasons as stated above the Learned Senior Counsel prayed this Bench to allow the Appeal by setting aside the impugned order passed in I.A. No. 85 of 2021.
Respondent’s Submissions:
# 9. The 1st Respondent filed its reply and denied the averments made by the Appellant. It is stated in the reply that the Learned Adjudicating Authority vide its order dated 28.05.2021 directed that the claim of this Respondent is to be put by RP before the CoC and also to consider reconstituting the CoC.
# 10. It is also averred that the Learned Adjudicating Authority determined the issues in the order that the claim of the Respondent should have been considered by the RP based on the books of accounts of the Corporate Debtor and whether the claim of this Respondent amounts to a financial debt. It is stated that loan facility extended by this Respondent to the Corporate Debtor, the Corporate Debtor had provided bank guarantee to the extent of Rs.20,80,44,296/- and under the loan agreement entered into between the Corporate Debtor and this Respondent, the Corporate Debtor was obligated to renew the bank guarantee. However, the Corporate Debtor failed to renew bank guarantee. It is also stated that the concession was extended to the Corporate Debtor against the 5 bank guarantees as detailed in para 5 of the reply affidavit. It is stated that the bank guarantee with respect to Rs. 2,75,00,000/- has expired on 18.06.2019 and the same was not renewed by the Corporate Debtor. The other bank guarantees amounting to a sum of Rs.11.47 crores have been encashed by the 1st Respondent till date and the liability of Corporate Debtor stands for remaining amount with interest and penal interest.
# 11. It is stated that this Respondent is a financial creditor and the Adjudicating Authority upon considering the loan agreement entered into by the Corporate Debtor as correctly categorised the concession extended under the said agreement by this Respondent as a loan to repay on the lapse of 10 years from the date of commencement of commercial production. The books of accounts of the Corporate Debtor reflects the loan as a financial debt. It is stated that the appellant has not made out any case and prayed this Bench to dismiss the appeal.
Analysis / Appraisal:
# 12. Heard the Learned Senior Counsel for the Appellant, perused the pleadings, documents filed by the respective parties. After analysing the pleadings, the issue fell for consideration is whether the Appellant has made out any case warranting interference by this Tribunal in the order passed by the Adjudicating Authority (impugned order).
# 13. The 1st Respondent herein filed an application being I.A. No.85 of 2021 by arraying the 2nd Respondent herein (RP of the Corporate Debtor) before the Adjudicating Authority seeking a direction from the Adjudicating Authority to the 2nd Respondent to admit the claim of the 1st Respondent filed vide Form-C and sought a direction to include such claim in the CoC and pass any other orders.
# 14. The Adjudicating Authority after evaluating the matrix of the case passed the following direction:
“V. 1. (1) I.A. No.85 of 2021 CP (IB) No.51/BB/2018 is disposed of with the directions that the claim filed by the applicant, the State of Karnataka, Department of Industries and Commerce as a Financial Creditor in Form-C shall be put up by the RP to the CoC for its consideration/acceptance, in the light of our findings and decision in the forgoing paragraphs. Reconstitution of the CoC will also be considered by the RP.
# 15. From the aforesaid directions, the Adjudicating Authority declared as under: viz.
(a) 1st Respondent i.e. State of Karnataka Department of Industries and Commerce as a Financial Creditor,
(b) The claim of the 1st Respondent shall be put up by the RP to the CoC for its consideration/acceptance.
# 16. The basis arriving such finding by the Adjudicating Authority on the following facts.
# 17. The Corporate Debtor approached the 1st Respondent (being the Department of Industries of Commerce which acts as a catalyst for the overall development of the industrial sector in the State of Karnataka) to avail sanction of loan under the special incentives and concessions scheme on 28.12.2021. The project of the Corporate Debtor to establish a wood-based industry for manufacture of particle boards etc. with an investment of Rs.495.29 crores. The 1st Respondent approved and recommended for sanction of special incentives and concessions and accordingly the government issued order. The 1st Respondent issued a loan eligibility certificate to the unit for a sum of Rs.226.87 crores to the Corporate Debtor as interest free loan subject to the terms and conditions contained in the governments VAT loan eligibility certificate dated 26.06.2013 and issued corrigendum dated 23.07.2013. It is to state that on 05.08.2013 an agreement entered into between the 1st Respondent and the Corporate Debtor recording the incentives and concessions granted to the Corporate Debtor. The 1st Respondent released interest free VAT loan to the Corporate Debtor against the submission of bank guarantees as a security.
# 18. While matter stood thus, CIRP was initiated against the Corporate Debtor on 26.10.2018, accordingly the IRP issued public announcement on 28.11.2018 inviting claims in Form-A in the daily newspapers, both in English and regional language calling for claims from the general public to be lodged against the Corporate Debtor on or before 10.12.2018. The admission order dated 26.10.2018 was also published on the website of the Corporate Debtor and the IBBI. The IRP received claims and the CoC was constituted comprising of Oriental bank of Commerce, Union Bank of India and Bank of Baroda. No claims were received by RP from the 1st Respondent.
# 19. In the 19th CoC meeting held on 11.02.2020 wherein it was decided to place the resolution plan submitted by the METL (Mohammed Enterprises) (Tanzania) Limited to e-vote and the e-voting conducted from 13.02.2022 to 06.03.2020 the resolution plan of METL was approved by all the members of CoC unanimously. It is seen that the CIRP period expired on 16.03.2020 and the 2nd Respondent filed an application being I.A. No.161 of 2021 before the Adjudicating Authority under Section 30 & 31 for approval of Resolution Plan.
# 20. It is seen that the 1st Respondent filed writ petition being No. 14851 of 2020 before the Hon’ble High Court of Karnataka seeking directions for reconstitution of CoC and consider its claim and also sought interim stay of CIR process pending before the Adjudicating Authority. The Hon’ble High Court granted ad-interim stay on 22.12.2020 and thereby the CIRP proceedings have been stayed. The Hon’ble High Court on 04.03.2021 disposed of the writ petition directing the 1st Respondent to move before the NCLT for its claim. Accordingly, the I.A. No.85 of 2021 came to be filed before the Adjudicating Authority seeking reliefs as prayed therein.
# 21. The Adjudicating Authority while deciding the aforesaid I.A. No.85 of 2021 framed issues whether the 1st Respondents claim would amount to a financial debt and whether such claim can be considered even if not submitted within the period stipulated under Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations 2016.
# 22. In regard to the aforesaid issues the Adjudicating Authority para 9 and para 12(8) of the impugned order (at page no. 80 & 84 of appeal paper book) observed as under:
“9. Hence, we are of the view that the Respondent’s argument that no actual money was disbursed for the time value of money and that there was no financial debt has to be rejected and the said transaction has to be considered as “Financial Debt” under Section 5(8) of the Code.”
“12(8). Hence, since the time lines referred to in Regn. 12(2) are held to be directory in nature the claim made by the financial creditor even after the last date has to be put up by the RP to the CoC for its consideration/acceptance, in the light of our observations in the foregoing paragraphs and the claim filed in Form-C, after the directions of the Hon’ble High Court. Reconstitution of the CoC will also be considered. It is directed accordingly.”
# 23. In view of the above directions passed by the Adjudicating Authority the moot point for consideration before us is: –
a) Whether the claim of 1st Respondent’s falls within the category of a financial debt or not?
b) Whether the claim filed, is within the time as prescribed under the Code or not?
c) Whether the claim can be admitted by the RP suo-motu irrespective of non-filing of claim?
# 24. The argument of the Respondents is that loan agreement dated 05.08.2013 entered between the 1st Respondent and the Corporate Debtor, the Corporate Debtor termed as borrower in the loan agreement and have a relationship of borrower lender and is obligated to repay the loan at the end of 10 years. The transaction between the parties would amount to a disbursal. However, the Appellant contend that the benefits and concessions granted to the Corporate Debtor were in the nature of incentives provided by the 1st Respondent herein and they are not in the nature of loan given in consideration of time value of money. In this regard we refer to Section 5(8) of the Code, which reads as under:
“5(8) “financial debt” means a debt along with interest, if any which is disbursed against the consideration for the time value of money and includes –
(a) money borrowed against the payment of interest.”
# 25. Admittedly, the Corporate Debtor availed a special scheme / incentive from the 1st Respondent and there is no actual disbursement of money. The said fact was not denied by the 1st Respondent herein. The loan was interest free and towards unpaid Value Added Tax for a period of 10 years which is a benefit issued by the Respondent as a promotion policy of the State Government. From the perusal of proceeding of Government of Karnataka dated 05.06.2012 annexed at A4 page 165-168 and the relevant page 167, the Government of Karnataka pleased to sanction following special incentives and concessions to the Corporate Debtor for their investment proposal as under:
1. 75% of the eligible gross VAT as soft loan for 10 years from the date of commencement of commercial production to be repay in 10 annual equal instalments starting from the eleventh year, not acceding 50% of the investment made by the unit.
2. 95% of the CST generated by inter-state sales of the end products to be reimbursed in the initial 5 years.
3. Exemption from payment of electricity duty in the initial 5 years from the date of commencement of commercial production on the power supply received from ESCOMs or power utilized from captive generation.
4. Eligible gross VAT should be worked out based on the following principles.
i. For sales made by the industrial unit meant for final consumers within the state, the Gross VAT on this transaction will be the Eligible Gross VAT.
ii. For sales made by the industrial unit to other declares within the state who in turn make inter-state sales, stock transfer or export sales, the buying dealer(s) will be eligible to claim ITC equivalent to Gross VAT on this turnover. The Gross VAT on this turnover will not be eligible for the loan incentive.
iii. Any sales or purchase between the company and its ancillary units or downstream units will be eligible for the VAT loan in the hands of one entity only. The same transaction will not be considered for the VAT Loan twice in case both seller and purchaser having incentive packages.
5. The unit is eligible to avail other normal incentives and concessions as per the Industrial Policy 2009-14.
# 26. From the above government order, it is seen that there is no actual disbursement of money that has made to the Corporate Debtor. Further, there is no enhancement of money after a particular time period. It is pertinent to note that the policy / scheme was to enhance / boost industrial production by providing some monitory incentive/concession and not to earn interest and the interest payment in case of default in repayment is purely in the nature of a penalty. It is reiterated that there is no actual disbursement of money. While so, the contention of the Appellant that since there is no interest factor as per the definition of the financial debt, the claim of the 1st Respondent cannot be considered as financial debt. The said issue has been decided by the Hon’ble Supreme Court in the matter of Orator Marketing Vs. Samtex Design Pvt. Ltd. reported in (2021) SCC Online 513 para 22 & 31 wherein the Hon’ble Supreme Court at para 22 held as under:
“22. The NCLT and NCLAT have overlooked the words “if any” which could not have been intended to be otiose. Financial debt means outstanding principal due in respect of a loan and would also include interest thereon, if any interest were payable thereon. If there is no interest payable on the loan, only the outstanding principal would qualify as a financial debt. Both NCLAT and NCLT have failed to notice Clause (f) of Section 5(8), in terms whereof financial debt includes any amount raised under any other transaction, having the commercial effect of borrowing.
31. At the cost of repetition, it is reiterated that the trigger for initiation of the Corporate Debtor Insolvency Resolution Process by a Financial Creditor under Section 7 of the IBC is the occurrence of a default by the Corporate Debtor. ‘Default’ means non-payment of debt in whole or part when the debt has become due and payable and debt means a liability or obligation in respect of a claim which is due from any person and includes financial debt and operational debt. The definition of ‘debt’ is also expansive and the same includes inter alia financial debt. The definition of ‘Financial Debt’ in Section 5(8) of IBC does not expressly exclude an interest free loan. ‘Financial Debt’ would have to be construed to include interest free loans advanced to finance the business operations of a corporate body.”
# 27. In view of the judgment of the Hon’ble Supreme Court (supra) even if the money borrowed does not carry any interest and include interest free loan advanced to finance the business operations of a corporate body, would amount to financial debt within the meaning of Section 5(8) of the Code. Therefore, the stand of the Appellant that there is no interest component for the claim made by the 1st Respondent is negatived.
# 28. From the above government order it is seen that there is no time value of money involved in such an arrangement. The Hon’ble Supreme Court in Phoenix ARC Pvt. Ltd. Vs. Spade Financial Services Limited & Ors. reported in (2021) SCC Online SC 51 para 50 held as under:
“The IRP in his letter dated 25.05.2018 has noted that as per the ledger provided by Spade, no interest was claimed on the alleged debt and no adjustment was made regarding the payment of Principal or interest by the Corporate Debtor to Spade. It has been submitted in the written submissions filed on behalf of Spade and AAA that the auditors of the Corporate Debtor had been putting a note in its balance sheets stating that the interest of 12% was not being paid to Spade due to a dispute. This submission in fact further fortifies the finding of the IRP that no interest has been paid on the alleged loan. The IRP has also noted in his letter that the Memorandum of Understanding does not stipulate the period of repayment. Hence, the consideration for time value of money is absent, which is an essential ingredient of a financial debt.
# 29. In view of similar facts and by relying upon the aforesaid decision of Hon’ble Supreme Court in re-Phoenix, this Tribunal holds that the claim of the 1st Respondent does not come under the definition of financial debt, accordingly, the observation made by the Adjudicating Authority in this regard is answered in negative.
# 30. Utmost the claim of the 1st Respondent being in respect of the liability of the Corporate Debtor to repay the Value Added Tax, which the Corporate Debtor has collected but not paid to the 1st Respondent, may be in the nature of operation debt as defined under Section 5(21) of the Code. The said provision reads thus:
“Operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment dues arising under any law for the time being in force and payable to the Central Government, any State Government or any Local Authority.” (Emphasis Supplied)
# 31. It is apt to note that various decisions of this Tribunal held that the statutory dues such as income tax, sales tax, value added tax and various other taxes fall within the definition of operational debt under Section 5(21) of the Code as held by this Tribunal in Pr. Director General of Income Tax (Admn. & TPS) Vs. M/s Synergies Dooray Automotive Ltd. & Ors. para 29 & 30 thus read as under:
“29. ‘Operational Debt’ in normal course means a debt arising during the operation of the Company (‘Corporate Debtor’). The ‘goods’ and ‘services’ including employment are required to keep the Company (‘Corporate Debtor’) operational as a going concern. If the Company (‘Corporate Debtor’) is operational and remains a going concern, only in such case, the statutory liability, such as payment of Income Tax, Value Added Tax etc., will arise. As the ‘Income Tax’, ‘Value Added Tax’ and other statutory dues arising out of the existing law, arises when the Company is operational, we hold such statutory dues has direct nexus with operation of the Company. For the said reason also, we hold that all statutory dues including ‘Income Tax’, ‘Value Added Tax’ etc. come within the meaning of ‘Operational Debt’.
30. For the said very reason, we also hold that ‘Income Tax Department of the Central Government’ and the ‘Sales Tax Department(s) of the State Government’ and ‘local authority’, who are entitled for dues arising out of the existing law are ‘Operational Creditor’ within the meaning of Section 5(20) of the ‘I&B Code’.”
# 32. Further, the Hon’ble High Court of Madras in Ruchi Soya Industries Ltd. Vs. Union of India & Anr. in W.P. No. 31090 of 2015 dated 26.04.2021 held that the customs duty is operational debt at para 80 held as under:
“80. The petitioner shall therefore file an appropriate application before the National Company Law Board and get the issue clarified from the National Company Law Board that the indeed crown debts like the differential “customs duty” payable to the respondent under the subject bill of entry which is the subject matter of the present writ petition were treated as “operational debt” before it by the “corporate applicant”.
# 33. Now deal with Point No. 2.
# 34. It is an admitted fact that the I.A. No.85 of 2021 filed by the 1st Respondent herein, more than 2 years after initiation of CIRP and almost one year after approval of plan by the CoC. Further, it is an admitted fact that the 1st Respondent had not filed any claim in the proper format within the time prescribed before the RP. The Adjudicating Authority vide order dated 26.10.2018 initiated CIRP against the Corporate Debtor and the RP published public announcement and invited claims from all creditors in the month of November, 2018. The paper advertisement has been enclosed at Annexure A-7 page 204. In spite of said advertisement in the newspaper the 1st Respondent failed to file its claim before the RP nor filed any application before the Adjudicating Authority during the CIRP proceedings. The RP collated and verified the claims received by it and on the basis of same the CoC was constituted in December, 2018. After deliberations on the plans of the Prospective Resolution Applicants (PRAs), the CoC approved one of the plans and the CIR process has been completed. One of the contentions of the Appellant that a Joint Director of the 1st Respondent visited the Corporate Debtor in the month of February, 2020 and he was aware of the CIR Process against the Corporate Debtor, however, chose not to take any action with regard to their claim either before the RP or before the Adjudicating Authority. The 1st Respondent approached the Adjudicating Authority belatedly. This Tribunal in the matter of Peecon Developers Pvt. Ltd. Vs. Bimal Agarwal RP in Company Appeal (AT) (Ins) No. 756 of 2021 para 5, held as under:
“5. It is an admitted fact that the last date for submissions of claims was 04.12.2019, however, the Appellant has filed his claim on 12.12.2020 i.e delay of 374 days. The Appellant in any case cannot get the advantage of the Judgment of Hon’ble Supreme Court in Suo Moto Writ Petition (c) No. 03/2020 as prescribed period has already been expired on 04.12.2019 for submitting the claim. In the impugned order, it is mentioned that the CIRP is at the stage of about to end. Ld. Adjudicating Authority has also mentioned that if the Appellant’s claims is directed to consider at belated stage it will not only be unfair to the other creditors who could not file their claim with the RP because of the delay but would also dilute the purpose of publication of Form-A. CIRP is a time bound process and if the Adjudicating Authority sets the clock back, it would certainly go against main objective of the Code.”
# 35. Further, this Tribunal in the matter of Deputy Commissioner of GST & Central Excise Vs. Mr. Vijay Kumar V. Iyer in Company Appeal (AT) (Ins) No. 604 of 2021 para 10 & 12 held as under:
“10. We have gone through the Appeals and although it is stated that collectively Hundred Crores are involved with regard to both the Appeals, the fact remains that till the Resolution Plan was approved no claim was submitted by the Appellants in both these Appeals. The Impugned Order shows that these were proceedings arising out of Company Petitions of 2018 and thus the excuse of Covid-19 which attracted Lockdown in March, 2020 is not appealing.
12. Keeping in view above observations of Hon’ble Supreme Court of India, we do not find any reason to entertain these Appeals. Even if the Resolution Plan has been challenged in other Appeals by other entities succeeds, fact would still remain that the claims of the Appellants were never filed during CIRPs and thus there was no question of considering the same in the Resolution Plan. As regards the observations made with regard to Clause 9.1.4, with or without the observations, Judgment of Hon’ble Supreme Court is clear and binding. The Department of the Appellant will have to follow Judgment passed by the Hon’ble Supreme Court of India.”
# 36. In view judgments of this Tribunal (supra) the 1st Respondent did not filed the claim before the RP during CIRP period therefore, there was no question of considering the same by the CoC at such a belated stage. The Hon’ble Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Civil Appeal No. 8129 of 2019 para 71 & 95, held that the resolution plan approved by the Adjudicating Authority shall also be binding on the Central Government, any state government or any local authority to whom a debt is owed in respect of payment of dues arising under any law for the time being enforce, such as authorities to whom statutory dues are owed, including tax authorities. However, in the present case, an application for approval of plan being I.A. No.161 of 2020 was pending before the Adjudicating Authority and the Adjudicating Authority vide the aforesaid impugned order dated 28.05.2021 disposed of the said I.A. and against the same an appeal is also pending before this Tribunal in which the matter was heard and reserved for orders.
# 37. It is apt to note that one of the most crucial principle is time is essence in any resolution process within which the process has to be completed in a time bound manner as contemplated under the Code. The Hon’ble Supreme Court in the landmark judgment of M/s Innoventive Industries Ltd. Vs. ICICI Bank & Anr. Reported in (2018) 1 SCC 407 paras 12, 16 & 31 held that “it can be seen that time is time of essence in seeing whether the corporate body can be put back on its feet, so as to stave off liquidation”.
# 38. Therefore, this Tribunal find that the claim of the 1st Respondent herein is belated and cannot be considered and the finding of the Adjudicating Authority in directing the RP to place the claim in Form-C before CoC per se illegal and unsustainable accordingly, the point is answered against the 1st Respondent.
# 39. The next point for consideration is whether the RP has power to admit the claims suo-motu?
# 40. The code prescribes the duties to be performed by the ‘Interim Resolution Professional’ and the ‘Resolution Professional’, as per Section 18 and Section 25 of the I & B Code, 2016. The IBBI (Insolvency Resolution Process for Corporate persons) Regulations 2016, prescribes the procedure to be adopted/followed. As per Chapter IV Regulation 7 of the Regulations, the ‘Claims’ by the ‘Operational Creditor’ to be submitted with proof to the ‘Interim Resolution Professional’ in Form-B and as per Regulation 8 of the Regulations, the ‘Financial Creditors’ shall submit the ‘Claims’ to the ‘Interim Resolution Professional’ in Form-C. After receipt of the ‘Claims’, the ‘Interim Resolution Professional’, shall verify the ‘Claims’ in accordance with Regulation 13 and the ‘Interim Resolution Professional’, maintained ‘List of Creditors’, containing ‘Names of Creditors’ along with the ‘Amount’ claimed by them, the amount of their ‘Claims’ admitted and the ‘Security Interest’, if any, in respect of such ‘Claims’. There is no such provision that the ‘Interim Resolution Professional’, shall admit the ‘Claim’ without filing a ‘Claim Form’ either in ‘Form-B’ or in ‘Form-C’. Therefore, this ‘Tribunal’, is of the considered view, that the ‘Interim Resolution Professional’, ‘suo-motu’ cannot admit the ‘Claims’ without their being a ‘Claim’ by the ‘Claimants’ viz. ‘Operational Creditors’, ‘Financial Creditors’ and ‘Claims’ by other ‘Creditors’. Every ‘Claim’ shall be submitted by the ‘Claimant’ with proof and the issue is answered accordingly.
Conclusion:
# 41. Having discussed the issues in detail, this ‘Tribunal’, comes to a resultant conclusion that the order passed by the ‘Adjudicating Authority’ in I.A. No. 85 of 2021 is ‘per se’, ‘an illegal’ and ‘an unjusticiable’ and the ‘impugned order’, passed in I.A. No. 85 of 2021 in C.P. (IB) No. 51/BB/2018 dated 28.05.2021 by the ‘Adjudicating Authority’ is interfered with and the same is set aside. Consequently, the instant ‘Appeal’ succeeds.
# 42. In fine, the Company Appeal (AT) (CH) (Ins.) No.160 of 2021 is ‘allowed’. No order as to costs. The ‘interim order’ dated 03.08.2021 is made absolute. Applications, if any, pending stand ‘closed’.
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