2023 (10) TMI 1508 - Tri - IBC

Admission of applicant s claim as Corporate Insolvency Resolution Process (CIRP) costs - seeking to set aside e-mail communication issued by the Liquidator modifying the claim of the Applicant - seeking to restrain on distribution of proceeds of Liquidation Estate to other Stakeholders - seeking reimbursement of legal costs incurred in prosecuting this application - Levy of interest on the original outstanding as claimed by the Applicant - HELD THAT - The Applicant has not filed any claim within the prescribed time under the Liquidation Process Regulations. However the fact of supply of the Bunkers was within the knowledge of the Liquidator who had contested the claim from the suppliers of the Applicant before Admiralty Court. It is not disputed that the Applicant had issued debit note levying interest on the delayed payment on 25.09.2019 and the claim was filed by the Applicant on 23.03.2019 however no interest was claimed in such claim form. Nonetheless the Liquidator admitted the claim of Principal amount of the Applicant after deducting therefrom the value of supplies made by Dushyant Patel and Gujarat Mariners settled before Admiralty Court. The fact of the suit having been filed by the suppliers of the Applicant was brought to its knowledge by the Resolution Professional and it never bothered to take note of same. Due to pendency of the suits the concerned Ships could not have been disposed off thus putting the realisation of the assets of the Corporate Debtor qua those ships in suspension. Since the Resolution Professional/Liquidator is obligated to preserve the assets of the Corporate Debtor there are no infirmity in act of the Resolution Professional/Liquidator in settling the dues of the Suppliers of the Applicant before Admiralty Court and deducting the same therefrom at the time of admission of Applicant s belated claim. Levy of interest on the original outstanding as claimed by the Applicant - HELD THAT - The claim of interest was not advanced at the time of filing of the claim by the Applicant back on 23.03.2019 while the Applicant must have been conscious of the statement in the invoices issued by it from time to time about the levy of interest. In this back drop the fact if the stipulation of interest was mere a statement to act as deterrent against the delayed payment or it was in actual meant to be enforced cannot be reconciled. Accordingly there are no merit in the claim of the Applicant for payment of the interest. There are merit in the submission of the Resolution Professional that the present application is to circumvent the specific remedy embodied in Section 42 of the Code in case any claimant is aggrieved by the decision of the Liquidation in respect of admission of their claim. Accordingly this application deserve to be dismissed on that ground also because even if this application is taken as an Appeal u/s 42 of the Code the same would be beyond the statutory period provided u/s 42 of the Code. Conclusion - i) The Applicant s failure to file a timely claim under the Liquidation Process Regulations justified the Liquidator s actions in admitting only the principal amount after deductions. ii) The Applicant s requests to restrain distribution of proceeds and to reimburse legal costs due to procedural delays and settlements denied. iv) Applicant s interest claim dismissed noting the lack of initial assertion and procedural delays. Application dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the Applicant's claim for USD 364,257.29 should be admitted as Corporate Insolvency Resolution Process (CIRP) costs.
• Whether the email communication dated 20.02.2023 by the Liquidator, which modified the Applicant's claim, should be set aside.
• Whether the distribution of proceeds from the liquidation estate to other stakeholders should be restrained.
• Whether the Applicant is entitled to reimbursement of legal costs incurred in prosecuting the application.
• Whether the Applicant's claim for interest on delayed payments is justified.
• Whether the application circumvents the specific remedy provided under Section 42 of the Insolvency and Bankruptcy Code (IBC).

2. ISSUE-WISE DETAILED ANALYSIS

Admission of the Applicant's Claim as CIRP Costs

• Relevant Legal Framework and Precedents: The Applicant argued that its claim should be prioritized as CIRP costs under Section 53(1) of the IBC.
• Court's Interpretation and Reasoning: The Court noted that the Applicant failed to file its claim within the prescribed timeline under the Liquidation Process Regulations. The Liquidator admitted the principal amount after deducting the value of supplies settled before the Admiralty Court.
• Key Evidence and Findings: The Applicant supplied bunkers during the CIRP, but did not file a claim during the liquidation process within the deadline.
• Application of Law to Facts: The Applicant's failure to file the claim timely and the subsequent settlement of its suppliers' claims in Admiralty Court justified the Liquidator's actions.
• Treatment of Competing Arguments: The Applicant's claim was deemed exaggerated, and the Court found no merit in the Applicant's arguments.
• Conclusions: The Applicant's claim was not admitted as CIRP costs due to procedural non-compliance and the settlement of related claims.

Email Communication and Modification of Claim

• Relevant Legal Framework and Precedents: The Applicant challenged the Liquidator's email as an improper modification of its claim.
• Court's Interpretation and Reasoning: The Court found that the Applicant's challenge was an attempt to circumvent the remedy under Section 42 of the IBC.
• Key Evidence and Findings: The email requested a no-objection certificate (NOC) for settling related supplier claims, which the Applicant refused.
• Application of Law to Facts: The Court upheld the Liquidator's actions as within his duties to protect assets and settle claims efficiently.
• Treatment of Competing Arguments: The Applicant's refusal to grant an NOC delayed the settlement process.
• Conclusions: The email modification was justified, and the application to set it aside was dismissed.

Distribution of Liquidation Proceeds and Reimbursement of Legal Costs

• Relevant Legal Framework and Precedents: The Applicant sought to restrain distribution and claim legal cost reimbursement.
• Court's Interpretation and Reasoning: The Court found no basis for restraining distribution or reimbursing legal costs.
• Key Evidence and Findings: The Applicant's claims were not prioritized due to procedural delays and settlements.
• Application of Law to Facts: The Applicant's actions contributed to delays, negating claims for restraining distribution or cost reimbursement.
• Conclusions: The requests for restraining distribution and cost reimbursement were denied.

Interest on Delayed Payments

• Relevant Legal Framework and Precedents: The Applicant claimed interest based on invoice terms.
• Court's Interpretation and Reasoning: The Court questioned the enforceability of interest claims, noting the Applicant's delayed claim filing.
• Key Evidence and Findings: The Applicant did not initially claim interest despite invoice terms.
• Application of Law to Facts: The Court found no merit in the interest claim, viewing it as a deterrent statement rather than enforceable.
• Conclusions: The interest claim was dismissed due to lack of initial assertion and procedural delays.

Circumvention of Section 42 of the IBC

• Relevant Legal Framework and Precedents: The Court considered whether the application circumvented Section 42 remedies.
• Court's Interpretation and Reasoning: The application was deemed an improper attempt to bypass specific statutory remedies.
• Conclusions: The application was dismissed as it sought to circumvent Section 42 of the IBC.

3. SIGNIFICANT HOLDINGS

• The Court held that the Applicant's failure to file a timely claim under the Liquidation Process Regulations justified the Liquidator's actions in admitting only the principal amount after deductions.
• The Court dismissed the Applicant's challenge to the email modification, finding it within the Liquidator's duties to protect assets and settle claims.
• The Court denied the Applicant's requests to restrain distribution of proceeds and to reimburse legal costs due to procedural delays and settlements.
• The Court dismissed the Applicant's interest claim, noting the lack of initial assertion and procedural delays.
• The Court found the application to be an improper attempt to circumvent Section 42 of the IBC.
• "The act of the Resolution Professional in seeking NOC in respect of the dues of suppliers of Applicant was within scope of his duties to protect the assets, and have the claim of the Applicant settled expeditiously."
• The application IA 1795/2023 was dismissed in its entirety.