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2025 (7) TMI 85 - AT - IBCRejection of claim of the Appellant - barred by limitation - absence of proof of claim - HELD THAT - Apparently in the instant case admittedly the decision of the Liquidator to reject did take place on 24.11.2020 and the Appellant had preferred the initial Appeal before Ld. Adjudicating Authority on 16.12.2020 that is after 22 days which is beyond the prescribed period of limitation; further when the Appeal was reported to be defective despite opportunity being granted the same was not rectified and the status of the Appeal u/s. 42 remained pending as a defective Appeal before Ld. Adjudicating Authority for more than two and half years. The Appellant had filed yet another Appeal under Section 42 of the Code on 16.07.2023 as against the rejection of claim by the Liquidator as passed on 24.11.2020 which quite obviously would be much beyond the period of limitation i.e. beyond 14 days as prescribed under law. The process of submission of claim as contemplated under the amended provision as contained under Regulation 16 of IBBI (Liquidation Process) Regulations 2016 will not be applicable in the instant case particularly when the claim herein relates to the Assessment Year 2011 to 2017 which is prior to the amendment. The amendment in itself will not have retrospective applicability. Apart from it there would be yet another reason because in Regulation 16 as it was existing at the stage when the claim was to be considered it required a proof of claim . Reference of the term proof of claim as it was then contained under the Regulation 16 the submission of claim was not relevant. What is more relevant to be considered is that the person who intends to raise a claim will have to establish by evidence that he has got a legally sustainable claim to be considered and decided that means the burden of establishing the proof of the claim was required to be discharged by the Appellant herein under the then existing provisions of Regulation 16 as it was then existing in the Statute books. The submission of a claim of the Appellant will not be falling under Regulation 16 of IBBI (Liquidation Process) Regulations 2016 as it existed prior to 25.07.2019. Since the Appellant s first Application under Section 42 of the Code remain pending as defective and defects were not rectified the second Application for the same cause of action is not maintainable. Admittedly the claim of the Appellant stood rejected by the Liquidator as back as on 24.11.2020 and if at all the Limitation prescribed under Section 42 of the Code is taken into consideration filing of a claim on 16.07.2023 was barred by limitation and the same could not have been entertained - Appeal dismissed.
The core legal questions considered in this judgment include:
1. Whether the claim submitted by the Appellant against the Corporate Debtor during liquidation proceedings was barred by limitation under the Insolvency and Bankruptcy Code, 2016 (I&B Code), specifically under Section 42. 2. Whether the Appellant's failure to submit the claim within the prescribed time and in the correct form precluded the claim's admission. 3. Whether the Appellant's subsequent appeal against the rejection of the claim by the Liquidator was maintainable, given the defects and delay in filing. 4. Whether the approval of the resolution plan and the sale of the Corporate Debtor as a going concern barred any further claims against the Corporate Debtor. 5. The applicability of the amended Regulation 16 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, to the claim submitted by the Appellant. 6. The evidentiary burden on the Appellant to establish a legally sustainable claim during liquidation proceedings. Issue-wise Detailed Analysis: 1. Limitation Bar under Section 42 of the I&B Code: The legal framework under Section 42 of the I&B Code allows a creditor to file an appeal against the Liquidator's decision accepting or rejecting a claim within 14 days from receipt of such decision. The Court noted that the Liquidator rejected the Appellant's claim on 24.11.2020. The Appellant filed an initial appeal on 16.12.2020, which was beyond the 14-day limitation period (22 days after rejection). Despite being given an opportunity to rectify defects in the appeal, the Appellant failed to do so for over two and a half years. Subsequently, the Appellant filed another appeal on 16.07.2023, which was also barred by limitation and was not maintainable. The Court reasoned that the Appellant could not benefit from his own failure to rectify the initial defective appeal and then file a fresh appeal. The limitation bar and procedural defects rendered the subsequent appeal invalid. The Court applied the limitation provision strictly, emphasizing the statutory time frame and the need for compliance. 2. Submission of Claim and Form Defects: The Appellant submitted his claim in Form B on 02.09.2020, two years after the invitation to submit claims was published on 29.08.2018. Moreover, the Appellant initially filed the wrong form and later submitted Form C on 06.10.2020 to rectify defects. Despite these efforts, the Liquidator rejected the claim due to the delay and procedural non-compliance. The Court underscored that timely submission of claims in the correct form is essential under the liquidation process. The delay of two years and the initial submission of an incorrect form undermined the Appellant's claim. The Court noted that the Appellant's knowledge of liquidation proceedings only arose in August 2020, which did not justify the delay or procedural lapses. 3. Effect of Approved Resolution Plan and Sale of Corporate Debtor: The Court observed that the Corporate Debtor's assets were sold as a going concern and the resolution plan had been approved by the Adjudicating Authority. The Plan's approval and the sale to the Acquirer had created vested interests and finality in the process. The Court held that no claim could be entertained at this belated stage after the Plan's approval and sale, as per the statutory scheme and the Impugned Order's findings. This principle reflects the need to uphold the finality of the resolution process under the I&B Code, preventing reopening of settled claims once the Plan is sanctioned and the Corporate Debtor's assets transferred. 4. Applicability of Regulation 16 of IBBI (Liquidation Process) Regulations, 2016: The Appellant relied on the amended Regulation 16, notified on 25.07.2019, which governs the submission of claims during liquidation. The Court clarified that the amended regulation did not apply retrospectively to claims relating to assessment years 2011 to 2017, which predated the amendment. Therefore, the submission of the Appellant's claim was governed by the earlier version of Regulation 16. Under the earlier Regulation 16, the submission of a "proof of claim" was required rather than mere claim submission. The Appellant bore the burden to establish a legally sustainable claim with evidence. The Court found that the Appellant failed to discharge this burden adequately. 5. Burden of Proof and Evidence: The Court emphasized that the Appellant was required to provide proof of claim supported by evidence to establish the validity and sustainability of the claim. The absence of such proof and the delay in submission weighed against the Appellant. The Court noted that statutory tax dues and penalties amounting to over Rs. 740 crores were claimed, but the procedural and evidentiary deficiencies led to rejection. Treatment of Competing Arguments: The Appellant argued for rectification of defects and contended that the claim should be entertained despite delay. The Court rejected this, holding that the statutory limitation and procedural requirements could not be waived. The Appellant also sought to raise issues related to share allocation and sale on a clean slate basis, but the Court declined to entertain these as they were beyond the scope of the appeal and irrelevant given the finality of the resolution plan. Conclusions: The Appellant's claim was barred by limitation under Section 42 of the I&B Code due to delayed and defective appeal filing. The claim was submitted late and in an incorrect form, and the Appellant failed to rectify defects timely. The approved resolution plan and sale of the Corporate Debtor's assets precluded entertaining belated claims. The amended Regulation 16 was not applicable retrospectively, and the Appellant failed to provide requisite proof of claim under the earlier regulation. Accordingly, the Appellate Tribunal dismissed the appeal for lack of merit. Significant Holdings: "The provisions of Section 42 of I & B Code, 2016, contemplates that the Creditor may also file an Appeal against the decision of the Liquidator, before the Ld. Adjudicating either accepting or rejecting the claim, within 14 days from the receipt of such decision." "The Appellant cannot take the advantage of his own wrong of not rectifying the defects of the initial Appeal filed as back as on 16.12.2020, and then preferring of a subsequent Appeal under Section 42 of the Code, is not maintainable in the eyes of law, apart from being barred by limitation." "In the absence of there being any provision available under law, to entertain any claim in a Plan which has already been approved by the Learned Tribunal that too, at the stage when the Corporate Debtor has already been sold as a going concern and has been, as of now taken over by the Acquirer, no claim of the Appellant as such, could be entertained at this belated stage." "The process of submission of claim as contemplated under the amended provision as contained under Regulation 16 of IBBI (Liquidation Process), Regulations 2016, will not be applicable in the instant case, particularly when the claim herein relates to the Assessment Year 2011 to 2017 which is prior to the amendment. The amendment in itself will not have retrospective applicability." "The person who intends to raise a claim, will have to establish by evidence, that he has got a legally sustainable claim to be considered and decided, that means, the burden of establishing the proof of the claim was required to be discharged by the Appellant herein under the then existing provisions of Regulation 16." Core principles established include the strict enforcement of limitation periods under the I&B Code for appeals against Liquidator decisions, the necessity for timely and proper submission of claims in liquidation proceedings, the non-retrospective application of regulatory amendments, and the finality of approved resolution plans barring belated claims. Final determinations on each issue were that the Appellant's claim was time-barred, procedurally defective, unsupported by adequate proof, and precluded by the finality of the resolution plan and sale of the Corporate Debtor's assets, leading to dismissal of the appeal.
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