CLAIMS UNDER LIQUIDATION PROCESS
CLAIMS UNDER LIQUIDATION PROCESS
Unless the corporate insolvency resolution process is completed within the time frame or the extended time frame, the corporate debtor may be ordered for liquidation on the file of the Resolution Professional before the Adjudicating Authority on getting approval of 66% of the Committee of Creditors. Even the Committee of Creditors, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors approved by not less than sixty-six per cent. of the voting share to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order. On receipt of the application the Adjudicating Authority shall pass a liquidation order. The Adjudicating Authority shall appoint liquidator on receipt of his consent to act as liquidator.
On the appointment of liquidator all powers of the board of directors, key managerial personnel and the partners of the corporate debtor, as the case may be, shall cease to have effect and shall be vested in the liquidator. The liquidator is responsible to carry out the liquidation process from the liquidation commencement date to till the dissolution of the corporate debtor.
The liquidator shall make a public announcement in Form B within five days from the date of his appointment calling upon the stakeholders to submit their claims or update their claims submitted during the corporate insolvency resolution process, as on the liquidation commencement date. The public announcement also provides the last date for submission of claims by the stakeholders. The last date for receipt of claim shall be thirty days from the liquidation commencement date.
The public announcement also provides that where a stakeholder does not submit its claims during the liquidation process, the claims submitted by such a stakeholder, and duly collated by the interim resolution professional/resolution professional during the corporate insolvency resolution process under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, shall be deemed to be submitted under section 38.
Submission of claims
Regulation 16 provides that a person, who claims to be a stakeholder, shall submit its claim, or update its claim submitted during the corporate insolvency resolution process, including interest, if any, on or before the last date mentioned in the public announcement. He shall prove his claim for debt or dues to him, including interest, if any, as on the liquidation commencement date.
Claims by operational creditor
The operational creditor other than a work man or employee shall submit proof of claims to the liquidator in Form C either by post or by electronic means or in person. The existence of debt may be proved by the operational creditor on the basis of-
Claims by Financial creditor
The Financial Creditor shall submit proof of claim to the liquidator in electronic means in Form D. The existence of debt due to the financial creditor may be proved on the basis of-
Claims by workmen and employees
A workman or an employee of the corporate debtor shall submit proof of claim to the liquidator in person, by post or by electronic means in Form E. If there are dues to numerous workmen or employees of the corporate debtor, an authorized representative may submit one proof of claim for all such dues on their behalf in Form F. The existence of dues to workmen or employees may be proved by them, individually or collectively, on the basis of-
Claims by other stakeholders
The stakeholders, other than financial creditor, operational creditor and workmen and employees, shall submit proof of claim to the liquidator in person, by post or by electronic means in Form G. The existence of the claim of the stakeholder may be proved on the basis of –
The existence of a security interest may be proved by a secured creditor on the basis of-
A secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realize its security interest. If the a secured creditor does not intimate its decision within 30 days from the liquidation commencement date, the assets covered under the security interest shall be presumed to be part of the liquidation estate.
If a secured creditor proceeds to realize its security interest, it shall pay as much towards the amount payable as it would have shared in case it had relinquished the security interest, to the liquidator within ninety days from the liquidation commencement date and the excess of the realized value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator within 180 days from the liquidation commencement date. If the amount payable is not certain by the date the amount is payable the secured creditor shall pay the amount, as estimated by the liquidator. Any difference between the amount payable and the amount paid above shall be made good by the secured creditor or the liquidator, as the case may be, as soon as the amount payable under this sub-regulation is certain and so informed by the liquidator.
If the secured creditor fails to comply with the above then the said asset shall form part of the liquidation asset.
Withdrawal of claim
A creditor may withdraw or vary his claim under this section within 14 days of its submission.
Time limit to receive claims
The liquidator shall receive or collect the claims of creditors within a period of 30 days from the date of the commencement of the liquidation process.
Production of documentary evidence
If a person seeks to prove a debt in respect of a bill of exchange, promissory note or other negotiable instrument or security of a like nature for which the corporate debtor is liable, such bill of exchange, note, instrument or security, as the case may be, shall be produced before the liquidator before the claim is admitted. The liquidator may require any creditor or the corporate debtor or any other person to produce any other document or evidence which he thinks necessary for the purpose of verifying the whole or any part of the claim.
In the case of rent, interest and such other payments of a periodical nature, a person may claim only for any amounts due and unpaid up to the liquidation commencement date.
Debt payable at a future time
A person may prove for a claim whose payment was not yet due on the liquidation commencement date and is entitled to distribution in the same manner as any other stakeholder. Where a stakeholder has proved for a claim and the debt has not fallen due before distribution, he is entitled to distribution of the admitted claim reduced as follows-
Verification of claims
The liquidator shall verify the claims submitted within 30 days from the last date for receipt of claims. The liquidator shall also verify the claims collated during the corporate insolvency resolution process but not submitted during the liquidation process, within 30 days from the last date for receipt of claims during liquidation process and may either admit or reject the claim, in whole or in part. The liquidator shall determine the value of claims admitted in such manner as may be specified by the Board.
The liquidator may, after verification of claims under section 39, either admit or reject the claim, in whole or in part. If the liquidator rejects a claim, he shall record in writing the reasons for such rejection. The liquidator shall communicate his decision of admission or rejection of claims to the creditor and corporate debtor within 7 days of such admission or rejection of claims.
Where there are mutual dealings between the corporate debtor and another party, the sums due from one party shall be set off against the sums due from the other to arrive at the net amount payable to the corporate debtor or to the other party.
A creditor may appeal to the Adjudicating Authority against the decision of the liquidator accepting or rejecting the claims within 14 days of the receipt of such decision.
List of stakeholders
The liquidator shall prepare a list of stakeholders, category-wise, on the basis of proofs of claims submitted and accepted with-
The said list shall be filed before the Adjudicating Authority by the Liquidator within 45 days from the last date for receipt of claims.
Assignment of debt
A creditor may assign or transfer the debt due to him or it to any other person during the liquidation process in accordance with the laws for the time being in force dealing with such assignment or transfer. Both parties shall provide to the liquidator the terms of such assignment or transfer and the identity of the assignee or transferee.
Modification of list of stakeholders
When the liquidator comes across additional information warranting such modification, the liquidator may apply to the Adjudicating Authority to modify an entry in the list of stakeholders filed with the Adjudicating Authority.
The list of stakeholders, as modified from time to time, shall be-
By: Mr. M. GOVINDARAJAN - January 23, 2023