2024 (5) TMI 1348 - AT - Insolvency and Bankruptcy

CIRP - Liquidation of corporate debtor - Refund of an amount with interest paid to prevent invocation of their Bank Guarantee - Failure to comply with the terms of the contract - jurisdiction under Section 42 of IBC - HELD THAT - For the purpose of liquidation the liquidator has some special powers which are significantly different from those of the RP. Under Section 36 the liquidator forms a liquidation estate where liquidator holds all the properties of Corporate Debtor as a fiduciary for the benefit of the creditors. Another major function of the liquidator is the consolidation and verification of the claims submitted to him as has been prescribed by Section 35 of the IBC. After their appointment the liquidator has to issue a public announcement within 5 days from the appointment in Form B of Schedule II of the Liquidation Regulations. The purpose of the public announcement is to call upon the creditors and other such persons to submit their claims in relation to the corporate debtor. After the receipt of the claims the liquidator shall verify those claims submitted by the creditors and may also ask the creditors to submit any evidence in relation to their claims for the purpose of verification. In the liquidation process the liquidator has the power to reject claims raised and if a claim is rejected a creditor can appeal against this decision to the Adjudicating Authority. After all the required claims have been admitted by the liquidator he is required to determine the value of the claims for the purpose of distribution of the assets of the Corporate Debtor. This clearly entails the responsibility of more than merely collating claims but verification of claims and determination of their value. No material has been placed on record by the Appellant which shows that the Corporate Debtor had on any earlier occasion denied making payments against the invoices raised by the Respondent. This gives sufficient room to believe that the Corporate Debtor was satisfied with the level of services performed by TCEL. Coming to the issue of invocation of BG by the Corporate Debtor it is the case of the Respondent that having duly performed their obligations arising out of their contract with the Corporate Debtor and in the absence of any claim for defect or otherwise action on the part of the RP to invoke the BG of Rs. 56.80 lakh was without any basis - The first chance that the Respondent got to recover the BG equivalent amount which was wrongfully retained by the Corporate Debtor was when the liquidation process commenced and the Respondent acted accordingly. The liquidator is required to admit or reject a claim basis documentary evidence. The liquidator is required to independently assess the merits of such claims based on the documents/evidence adduced by each such creditor - the Liquidator has tried to justify the wrongful invocation of BG by raising the feeble defence that the BG equivalent had been paid without any demur or protest which seems to be more of an after-thought to cover the action of the RP. There are no hesitation in holding that the Respondent cannot be faulted in following the due process in filing its claim with the Liquidator. Furthermore in the liquidation process if a claim is rejected by the Liquidator a creditor can appeal against this decision before the Adjudicating Authority. The Adjudicating Authority enjoys complete jurisdiction under Section 42 of the IBC to deal with the decision of the Liquidator rejecting the claim filed by the Respondent under Section 38 of IBC. This is in consonance with the statutory position set out under the IBC. The Adjudicating Authority after perusing all material on record has rightly come to the conclusion while passing the impugned order that the Respondent is entitled to refund of Rs. 56.80 lakh being the amount of BG paid by it alongwith the payment of Rs. 16.73 lakh due in respect of invoice dated 22.11.2017 and accordingly directed the Liquidator to accept these claims. There are no reasons to interfere with the impugned order - appeal dismissed.

Summary

Issues Involved:
1. Rejection of the claim for refund of Rs. 56.80 lakhs paid to prevent invocation of Bank Guarantee (BG).
2. Rejection of the claim for Rs. 16.73 lakhs related to invoice dated 22.11.2017.
3. Jurisdiction of the Adjudicating Authority under Section 42 of IBC.

Detailed Analysis:

1. Rejection of the Claim for Refund of Rs. 56.80 Lakhs Paid to Prevent Invocation of Bank Guarantee (BG):
The Appellant contended that the Respondent, having paid the BG amount without protest, waived their right to seek a refund. The Respondent argued that the payment was made under duress to avoid harm to their professional image and market reputation. The Adjudicating Authority found no substantive evidence that the invocation of BG by MAHAGENCO was due to any deficiency in the Respondent's work. It was determined that the Corporate Debtor's action to invoke the BG was a reaction to MAHAGENCO's invocation of the Corporate Debtor's BG. The Tribunal held that the Respondent was entitled to a refund of Rs. 56.80 lakhs, as the payment was made under duress and without any defect in their work.

2. Rejection of the Claim for Rs. 16.73 Lakhs Related to Invoice Dated 22.11.2017:
The Appellant argued that the invoice was not certified by MSPG and that the Respondent was not entitled to payment as the plant handover did not take place. The Respondent countered that they had fulfilled their contractual obligations and raised the invoice accordingly. The Adjudicating Authority noted that there were no records of the Corporate Debtor disputing the liability to pay the invoice. The Tribunal found that the Liquidator had summarily rejected the claim without proper verification. The Respondent was therefore entitled to the payment of Rs. 16.73 lakhs for the invoice dated 22.11.2017.

3. Jurisdiction of the Adjudicating Authority under Section 42 of IBC:
The Appellant contended that the Adjudicating Authority exceeded its jurisdiction by granting relief related to BG, which is a separate and independent contract. The Tribunal clarified that under Section 42 of IBC, the Adjudicating Authority has complete jurisdiction to deal with the decision of the Liquidator rejecting the claim. The Tribunal emphasized that the Liquidator's role includes verifying claims and determining their value, and that the Adjudicating Authority rightly exercised its jurisdiction in this case.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision directing the Liquidator to accept the Respondent's claims for a refund of Rs. 56.80 lakhs and payment of Rs. 16.73 lakhs for the invoice dated 22.11.2017. The appeal was dismissed, affirming that the Respondent was justified in filing their claims and that the Liquidator had erred in rejecting them without proper verification. The Adjudicating Authority acted within its jurisdiction under Section 42 of IBC.