Substance over Form even for claim filing in CIRP! – Supreme Court
Brief Overview:
Claim submitted by a creditor under the CIRP cannot be rejected/overlooked merely on the fact that the Claim was submitted under the wrong category. The Supreme Court held that it is quintessential that where the claim is filed with a support of proof, then the same has to be considered.
Interestingly, it was reiterated that NCLT has the power to recall an order in the absence of statutory prohibition to that effect. This was with the Caveat, that such power should be exercised sparingly and not as a tool to re-hear the matter.
JC Takeaways:
1) CIRP Claim filing in right ‘Form’ is directory; claim supported by proof to be dealt on substantive merits.
2) Claim filed in wrong Form/category can be remedied by according due consideration in the category to which it actually belongs.
3) NCLT can recall its orders Resolution Plan approval order passed under Sec. 31(1) of IBC if.
(a) the order is without jurisdiction;
(b) the party aggrieved with the order is not served with notice of the proceedings in which the order under recall has been passed; and
(c) the order has been obtained by misrepresentation of facts or by playing fraud upon the Court /Tribunal resulting in gross failure of justice.
Technical Details:
1) Greater Noida Industrial Development Authority (“GNIDA”) challenged the approval of the resolution plan of the Corporate Debtor (“CD”) on grounds of wrongful rejection of its claim.
2) The claim filed by GNIDA under Form C (Claim Form for a Financial Creditor) of the CIRP Regulations, 2016 (“CIRP Regulations”) was not considered by Resolution Professional (“RP”) and the Committee of Creditors (“CoC”), since GNIDA was an operational creditor. Further, the Claim of GNIDA also did not find place in the approved Resolution Plan under any category of creditors.
3) The decision of the RP and CoC was affirmed by National Company Law Tribunal (“NCLT”) and National Company Law Appellate Tribunal (“NCLAT”) as the Claim Form was filed in an incorrect category.
4) In Appeal, the Hon’ble Supreme Court (“SC”) observed that once a claim is submitted with proof, RP has to verify the claim, as on the insolvency commencement date, and thereupon maintain a list of creditors along with the amount claimed by them, claims admitted and the security interest in terms of Regulation 12 of CIRP Regulations.
5) SC held that the claim cannot be rejected merely because it was submitted in a different Form. What is important is that the claim must be supported with a proof of claim and the category in which Form is to be submitted is directory in nature.
6) SC observed that plan submitted was not in compliance with the Section 30 (2) of the IBC. Even though GNIDA was a secured creditor by operation of law, yet the resolution plan projected GNIDA as one who did not submit its claim. Accordingly, SC observed that the Plan required reconsideration by the CoC.
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