[Bhavin Gada is a Partner at Economic Laws Practice, Advocates and Solicitors (“ELP”), and Manendra Singh an Associate Manager at ELP. The authors would like to thank Akshata Limaye, Associate at ELP, for her inputs]
The corporate insolvency resolution process (CIRP) for corporate persons under the Insolvency and Bankruptcy Code, 2016 (Code) was introduced with the primary objective of providing for a time-bound, viable resolution mechanism whereby a corporate entity could be maintained as a going concern while protecting the interests of the creditors.
While striking a balance between the time-bound nature of resolution process and ensuring that the interests of all the creditors are addressed, an interesting question arises in relation to the status of a claim which may be raised by a creditor beyond the timelines which are prescribed under the Code for inviting claims by the interim resolution professional (IRP).
In accordance with section 15(1)(c) of the Code read with regulation 6(2)(c) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ( CIRP Regulations), once the application for initiation of the CIRP is admitted by the National Company Law Tribunal (NCLT), a public announcement is required to be released by the IRP for inviting claims. The public announcement is required to provide for the last date (being 14 days) for submission of such claims from the date of the appointment of the IRP. Further, regulations 7, 8, 9 and 9A of the CIRP Regulations provide for the form and manner in which claims have to be submitted by various creditors.
In the above context, it is important to note regulation 12(2) of the CIRP Regulations, which states that:
“..A creditor, who failed to submit proof of claim within the time stipulated in the public announcement, may submit such proof to the interim resolution professional or the resolution professional, as the case may be, till the approval of a resolution plan by the committee..”
In view of the above, a creditor may file its claim before the IRP or the resolution professional (RP), as the case may be, even after the prescribed period, but until the approval of a resolution plan by the committee of creditors (COC). Notably, under section 31(1) of the Code, if the NCLT is satisfied that the resolution plan as approved by the COC meets the requirements of the Code, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. Therefore, it appears that once the resolution plan is approved by the NCLT, it becomes binding on all the creditors, including a creditor who may not have filed a claim in accordance with the provisions of the Code.
The above position seems to receive further support from section 238 of the Code, which states as follows:
“..The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law..”
In view of the above, it is not clear if such creditors who have not filed a claim (inadvertently or otherwise) during the CIRP will lose their legal right for their unpaid debt once the resolution plan is finalised and approved by the NCLT due to non-obstante nature of the Code. On another note, the language used in section 31(1) becomes critical, which states that:
“31(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan.”
Since section 31(1) seems to offer a hint that the resolution plan will be binding on those who are involved in the resolution plan, hence an inference could be drawn that a creditor who has failed to submit its claim (inadvertently or otherwise) during the permissible period was not involved, and thus not bound by the resolution plan.
Further, in addition to filing an appeal before appellate authorities as per the provisions of the Code (the grounds for appeal does not seem to suggest clearly if a case of non-submission of claims is covered as a ground), a creditor may choose to resort to article 300A of the Constitution of India (since non-obstante nature of the Code cannot override the constitutional provisions), which states as follows:
“..No person shall be deprived of his property save by authority of law..”
One may view that the above phrase “authority of law” to include the Code as well, however, such reading would isolate creditors (who have not filed their claims as per the CIRP Regulations) with no remedy for their bona fide claims.
In light of the aforementioned relevant statutory provisions and discussion, there seems to be a lack of clarity with respect to the status of claims of creditors who have not filed their claims as per the CIRP Regulations, and the statutory remedy available to them.
– Bhavin Gada & Manendra Singh
This post is misleading. The Law is very clear about filing of Claims till approval of resolution plan by CoC. Take for example a company undergoes a takeover in the normal course and not through CIRP. A third-party to the agreement of such takeover, who might be in a contractual arrangement with the company being taken over, will not lose such of its rights and remedies under the contractual arrangement that it had against the company being taken over, for the mere reason that it was not a party to the agreement for this takeover. It will continue to have these rights against the successor in title of the company which has been taken over.
if any operational creditors is not submitted claim in under CIRP period (under 270 days) after 5 to 6 months completion of CIRP period but till now NCLT has not passed any judgement either Liquidation or resolution, so at that time i)can we submit claim and ii) if we can, which form under CIRP or Liquidation?
Hi, I think there is slight misreading of the law / regulations by the author regarding the period of filing of claims by financial creditors. The claims are required to be submitted by the financial creditor within a period of 14 days from the date of appointment of interim resolution professional (IRP). The financial creditor may then, upon filing the form C, proceed to submit the proof of claims until the resolution plan is approved.
Hence, the position of law, regarding a financial creditor who misses submission of claims under Form C is still unclear.
Request you to correct if the above view is incorrect / different from the present position of law.
I had bought a plot in Ansal API Golf Links MOHALI sector 114 from original allottee and got transferred in my name from ansal office but didn’t have registry in tehsil. Insolvency case 16 november 2022 against ansal api Whether I also have to fill claim form. What will happen if I can’t fill claim and what’s the latest date to fill claim