Mr. Ashok Kumar Juneja vs Excise & Taxation Officer of State Tax

[Per.: Dr. Alok Srivastava, Member (Technical)]

The present appeal is preferred by the Appellant Mr. Ashok Kumar Juneja, Resolution Professional of Corporate Debtor Mastana Foods Private Limited under Section 61 of the Insolvency and Bankruptcy Code, 2016 (in short ‘IBC’) against the order dated 06.04.2021 in I.A. No. 1374 of 2021 (hereafter called Impugned Rectification Order) and order dated 16.02.2021 in I.A. No. 95 of 2021 (hereafter called Impugned Original Order), both orders being passed in CP (IB) No. 630(PB)/2019 by the Adjudicating Authority (National Company Law Tribunal, New Delhi).

The Respondent Excise & Taxation Officer of State Tax has stated in the appeal that the Respondent submitted its claim to the Resolution Professional (in short ‘RP’) on 26.10.2020, after 405 days from the date of initiation of Corporate Insolvency Resolution Process (in short ‘CIRP’). The RP rejected the claim filed by the Respondent in accordance with Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (in short ‘CIRP Regulations’) whereafter the Respondent filed application vide I.A. No. 95 of 2021 before the Adjudicating Authority in appeal. The Adjudicating Authority allowed the said I.A. 95/2021 on 16.02.2021 passing an ex-parte` order by condoning the delay in filing the claim of Rs. 9.65 crores by the Respondent, which had earlier been rejected by the RP. While passing this order, no notice was issued to the Appellant/RP nor was the RP afforded an opportunity to present his reply to the application.

The Appellant further states that when he came to know of the impugned order dated 16.02.2021 he filed an application bearing I.A. No. 1374(PB)/2021 under Rule 154 of National Company Law Tribunal Rules, 2016 (in short ‘NCLT Rules’) for rectification of the impugned original order dated 16.02.2021 as the order failed to record any submission of the RP. This application I.A. No. 1374(PB)/2021 was dismissed by the Adjudicating Authority vide the impugned rectification order dated 06.04.2021, without considering and looking into facts that there was indeed an accidental omission by the Adjudicating Authority in passing the original impugned order dated 16.02.2021. Aggrieved by both the Impugned Orders the Appellant/RP has filed the present appeal praying for setting aside both the impugned orders viz. order dated 06.04.2021 in I.A No. 1374(PB)/2021 and order dated 16.02.2021 in I.A. No. 95 of 2021.

We heard the arguments advanced by the RP ‘in-person’ and the Ld. Sr. Counsel/Additional Solicitor General for the Respondent in the matter and also perused the record.

The Appellant/RP has made the following prayers in the appeal:-

The RP ‘in-person’ has argued that the claim was filed by the Respondent after a delay of 405 days vide email dated 26.10.2020 (attached at Pg. 77 of the Appeal Paper Book) whereupon he replied to the Respondent through email informing him that as per Regulation 12(1) of the CIRP Regulations a creditor has to submit his claim with proof on or before the last date mentioned in the public announcement which was 3^rd October, 2019 in the CIRP of the Corporate Debtor. He has further argued that the Regulation 12(2) stipulates that a creditor who fails to submit his claim with proof within time period stipulated in the public announcement can submit claim with proof to the IRP/RP on or before ninetieth day of the insolvency commencement date, and in the present case since CIRP commenced on 18.09.2019 the 90 days’ period expired on 17.12.2019. The Appellant/RP, therefore, informed the Respondent that in view of delay in submitting the claim for an amount of Rs. 09,65,54,684 the RP is unable to admit it. He has also argued that after approval of the proposed Resolution Plan by the Committee of Creditors the Resolution Plan was submitted to the Adjudicating Authority on 25.11.2020 for its approval and is presently pending before the Adjudicating Authority. The RP has cited the judgment of this tribunal in the matter of Office of the Asst. State Tax Commissioner State Tax Department, Government of Maharashtra Versus Shri Parthiv Parikh & Ors. [CA (AT) (Ins) No. 583 of 2020] to point out that a claim filed much beyond the stipulated time period cannot be admitted in case the CIRP has advanced to a point when its admission will upset the timeline of the resolution process as IBC proceedings are to be completed in strict timelines.

The Ld. Additional Solicitor General appearing for the Respondent has argued that the claim of the Respondent was submitted to the RP prior to the resolution plan being approved by the CoC and therefore, even though the claim was not submitted in time, it ought to have been considered by the RP since it is a statutory claim. The Ld. ASG also sought to point out the distinction between the situation in the matter of Office of the Asst. State Tax Department, Government of Maharashtra Versus Shri Parthiv Parikh & Ors. (supra) and the situation in the present case by stating that in the instant case the matter was pending before the Adjudicating Authority and, therefore, admission of the Respondent’s statutory claim was possible.

We first look at the order dated 06.04.2021 in I.A. No. 1374 of 2021 which was filed by the RP seeking rectification of the order dated 16.02.2021. Rule 154 of the NCLT Rules, 2016 is as hereunder:-

Rule 154 of NCLT Rules allows the correction of any clerical or arithmetical mistakes arising from any accidental slip or omission. In the present case, the RP filed I.A. No. 1374 of 2021 for rectification of the order dated 16.02.2021 in I.A. No. 95 of 2021 which was disallowed vide order dated 06.04.2021. The relevant order dated 06.04.2021 is as follows:-

RP’s claim is that he was not given a notice of application I.A. No. 95 of 2021 and thus not given an opportunity to be heard, and in such a situation he was unable to place correct facts before the Adjudicating Authority. Therefore, this order may be rectified. We are of the opinion that such a request is not in the nature of seeking correction of clerical or arithmetical mistake and therefore, it was correctly rejected by the Adjudicating Authority.

We now look at the other impugned order dated 16.02.2021 in I.A. No. 95 of 2021 in CP (IB) No. 630(PB)/2019. The relevant portion in this order is as follows:-

In the facts of the case we note that a public notice was issued by the RP in the CIRP of Corporate Debtor and ninety days’ period as provided under Regulation 12(2) of CIRP Regulations expired on 17.12.2019. Respondent filed its claim for Rs. 9.65 crores on 26.10.2020 (later revised vide communication dated 03.03.2021 received by RP on 08.03.2021). When the claim was initially received by the RP on 26.10.2020, the resolution plan was under consideration of CoC which was approved in 10^th meeting of CoC on 07.11.2020. After approval of the Resolution Plan by the CoC, the application for approval of the Resolution Plan was filed by the RP before the Adjudicating Authority on 25.11.2020. While the resolution plan was pending for approval, IA No. 95 (PB)/2021 was considered by the Adjudicating Authority and ex-parte` order was passed on 16.02.2021 condoning the delay and for consideration by RP of claim on merits. Subsequently, the RP filed I.A. No. 1374(PB)/2021 on 13.03.2021, after the Resolution Plan had been approved by the Adjudicating Authority.

Now we look at the impugned order dated 16.02.2021 in I.A. No. 95 of 2021 by which the delay in submission of the claim by the Respondent has been condoned and the RP directed to consider the claim on merits. From the facts of the case the following dates are evident: -

From the above list of dates it is clear that 90 days’ period which is provided under Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 expired on 17.12.2019. The initial claim was submitted by the Respondent on 26.10.2020, more than 10.5 months beyond the expiry of time limit on 17.12.2019 for submission of proofs of claims. It is also evident that subsequent to the invitation of Expression of Interest on 18.08.2020, the prospective Resolution Applicants were short-listed in the 9^th CoC Meeting on 22.10.2020 and even by this time the Respondent had not submitted his claim to the RP. The proposed resolution Plans were considered in the 9^th CoC Meeting whereas the claim in question was sent to the RP on 26.10.2020. Thus, we find that the CoC had short-listed and considered the proposed resolution plans and till then no claim had been received from the Respondent. Thereafter, the Resolution Plans were considered and approved in the 10^th CoC Meeting on 07.11.2020 and the approved Resolution Plan was submitted for approval of the Adjudicating Authority vide I.A. No. 5283 of 2020 on 25.11.2020. Thus, it is clear that when the claim was first submitted by the Respondent to the RP, the CoC had already opened the proposed Resolution Plans received on 17.10.2020 and had begun considering them on 22.10.2020. Quite obviously the CIRP was at an advanced stage nearing finalization of the Resolution Plan before the claim was submitted to the RP by the Respondent.

It is the primary objective of the IBC that effort should be made to achieve successful resolution of the Corporate Debtor. If that doesn’t happen, the Corporate Debtor will go towards liquidation which would mean its corporate death. Hence, when prospective Resolution Plans had been received, opened and were being actively considered by the CoC, we do not think it proper that one particular claim of the Respondent should have been considered.

It is a moot point that if an opportunity had been granted to the RP at the stage of consideration of I.A. No. 95 of 2021, complete and factual information about the progress of CIRP as well as submission of Resolution Plans and short-listing of Resolution Applicants would have been placed before the Adjudicating Authority for a well-considered decision.

We are thus inclined to hold the view that in an appeal wherein rejection of a claim is being considered by the Adjudicating Authority, the RP who has rejected the claim should be heard to arrive at a judicious, fair and transparent decision. This has not been done in the present case. We are, therefore, of the opinion that the impugned order dated 16.02.2021 of the Adjudicating Authority in I.A. No. 95 of 2021 is erroneous and we accordingly quash and set aside the Impugned Order. Moreover, since the claim of the Respondent was submitted with inordinate delay and in view of the advanced stage of CIRP, we hold the view that the claim of the Respondent should not be included in CIRP since such an inclusion would mean that the resolution plans would have to be invited afresh leading to unnecessary delay in the resolution of the corporate debtor which could even jeopardize the eventual insolvency resolution of the corporate debtor.

In the facts of the case, the parties shall bear their own costs.