Ulhas Vallabhji Gala vs Mr. Anshul Gupta

Per Coram

The above application filed by the applicant seeks following reliefs:

Submissions of the Applicant are briefly extracted herein under:

The Corporate Debtor had approached the Applicant seeking financial assistance and the Applicant had lent and advanced a sum of Rs. 1,00,00,000/- (Rupees One Crore Only) and Rs. 2,50,00,000/- (Two Crores and Fifty Lakhs Only) to the Corporate Debtor on March 09, 2015 and August 22, 2017 respectively with an interest at the rate of 18% per annum on the aforesaid principal amounts, from the dates of disbursement.

The Corporate Debtor did not pay the interest amount of Rs. 16,42,500/- due and payable from April 01, 2016 till March 31, 2017 and the unpaid interest amount was also converted into loan by mutual consent of the Applicant and Corporate Debtor.

The borrower had paid interest to the Applicant for a period from April 01, 2017 to June 30, 2017 being Rs.4,76,761/-{(5,29,734- 52,973 (TDS)}.

Corporate Insolvency Resolution Process (“CIRP”) was initiated on 04.08.2021 against the Corporate Debtor and the Respondent was appointed as the Resolution Professional of the Corporate Debtor. Pursuant to which the Respondent issued Form-A inviting claims from the creditors of the Corporate Debtor. The latest Form-A was issued by the respondent on August 16, 2021.

The Applicant remained unaware about the initiation of CIRP against the Corporate Debtor and also about any such publication made inviting claims from any creditors of the Corporate Debtor.

On being informed by a third party, the Applicant had filed its claim with the Respondent on July 13, 2023, for an amount of Rs. 5,90,12,746/- (Rupees Five Crores Ninety Lakhs Twelve Thousand Seven Hundred and Forty-Six Only) inclusive of interest towards the principal amount borrowed by the Corporate Debtor.

The Applicant received an email dated 20.07.2023 from the Respondent stating that the claim submitted by the Applicant cannot be accepted due to delay and being after expiry of a period of 90 days from the date of CIRP, which is in contravention of the regulation 12(2) of the Insolvency Bankruptcy Board of India (Insolvency Resolution of Corporate Persons) Regulations, 2016 (“CIRP Regulations”). The Respondent in the same mail also stated that resolution plans have been received in the present case and therefore, the Respondent is in no position to consider the claim of the Applicant.

A reply mail was sent by the Applicant to the Respondent stating that on the date of the filing of their claim with the Respondent, proposed Resolution Plans neither were received by the respondent nor were they approved by the Committee of Creditors (“CoC”).

The Respondent is not an adjudicatory authority and has no right to reject the claim filed by a creditor, as held by the Hon’ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd. & Anr. V. Union of India & Ors. 2019 SCC OnLine SC 73.

Due to the imposition of a moratorium as per the provisions of the Insolvency and bankruptcy Code, 2016, the Applicant is prohibited from seeking recourse to any alternative body concerning his claim. Hence, the Applicant has chosen to bring their matter before this tribunal.

The Applicant also placed reliance on the decision of Hon’ble Supreme Court in the case of State Tax Officer (1) Vs. Rainbow Papers Ltd. in Civil Appeal No. 1661 of 2020 and on the order passed by the NCLT, Principal Bench, New Delhi in the case Edelweiss Asset Reconstruction Co. Pvt. Ltd. Vs. Adel Landmarks Ltd.

The Respondent filed affidavit in reply opposing the admission of this Application. The submissions of the Respondent in brief are extracted herein under:

The Applicant submitted their claim on July 13, 2023, in Form C for purported financial debt of Rs. 5,90,12,746/- (Rupees Five Crore Ninety Lakhs Twelve Thousand Seven Hundred Forty Six Only), and the Respondent vide email dated July 20, 2023, intimated that the claim of the Applicant cannot be verified at this belated stage due to delay and laches by the Applicant in submitting their claim.

The public announcement clearly prescribes that all the claims were to be filed on or before August 27, 2021 and the conjoined reading of the Regulation 12(1) & 12(2), CIRP Regulations, it can be ascertained that the ninetieth day of the CIRP is the cut-off date for submission of claim.

The ninetieth day from the Insolvency Commencement Date (‘ICD’) in CIRP of the Corporate Debtor was admittedly on November 2, 2021 (the 'Cut-Off Date'), and the Applicant submitted their claim on July 13, 2023, which is Six Hundred & Twenty (620) days from the cut- off date and Seven Hundred and Ten (710) days from the Insolvency Commencement Date.

Neither the Code nor the Regulation provides for any provisions empowering the Resolution Professional and/or the Adjudicating Authority to condone any delay in filing the claim and the co-ordinate benches of the NCLT, the Hon'ble NCLAT and the Hon'ble Supreme Court have condoned the delay in filing of Claims only on those occasions where the delay is due to sufficient cause and/or where substantial grounds are made out as the cause of delay.

It is a trite law that even though the timelines provided in the Code are directory and not mandatory the same are to be strictly adhered to until and unless an exceptional case is made out for deviation from the said timelines. It is stated that the Adjudicating Authority has discretionary powers to condone the delay in submission of claim only where such delay is attributable to a sufficient cause. The Resolution Professional states that a judicial discretion must be exercised in a manner known to law. No exceptional circumstances and/or sufficient cause has been shown by the Applicant for the delay in lodging claims.

The CIRP is a time bound process where the entire process is to be completed within three hundred and thirty (330) days and if the claims are filed and accepted at this belated stage then the same will adversely affect the resolution of the corporate debtor.

It is pertinent to note that it is the case of the Applicant that he became aware of the CIRP on June 20, 2023. However, the Applicant chose to file its claim only on July 13, 2023 and the said considerable delay from the date of knowledge to date of lodging of claim is also not satisfactorily explained by the Applicant.

The CIRP of the corporate debtor is at a very advanced stage where the members of CoC are actively considering the Resolution Plans. The members of CoC are negotiating with the prospective Resolution Applicant solely for the purpose of value maximization and the prospective Resolution Applicants are in the process to submit their final Resolution Plan.

The Ld. Counsel for the Respondent/Resolution Professional placed reliance on the decision of Hon’ble Supreme Court in the case of RPS Infrastructure Ltd. Vs. Mukul Kumar and Anr. In Civil Appeal No. 5590 of 2021. Ld. Counsel also placed reliance on the order passed by the Hon’ble NCLAT Chennai Bench in the case of Mr. Toral Reathod Vs. Mr. Gopalsamy Ganesh Babu in Comp. Appeal (At)(CH)(Ins). No. 143 of 2023.

In view of the foregoing, the Resolution Professional submits that the Application be rejected.

Heard the Learned Counsel appearing on both sides and perused the material available on record.

It is noted that the Resolution Professional/Respondent made the public announcement inviting the claims on 16.08.2021 and the last date for submission of the claim was 27.08.2021. Further as per the Regulation 12(1) & 12(2), the 90^th day from CIRP is 02.11.2021 (The cut-off date.) However, the Applicant submitted claims before the Respondent on 13.07.2023 which is after the delay of 617 days from the cut-off date. Thereafter, the Resolution Professional sent an email to the Applicant rejecting the claim of the applicant on the ground that the claims have been received beyond the period prescribed under Regulation 12(2) of the IBBI (Insolvency Resolution of Corporate Persons) Regulations, 2016. He further informed that the resolution plans had already been received on 05.07.2023.

After rejection of the claim, the Applicant sent an email to the Respondent stating that “you have arbitrarily rejected my claim in respect of Vijaygroup Reality LLP on the ground of delay in filing the claim. Kindly note that the Resolution Professional cannot reject a claim on the ground of delay in filing of the claim when the Resolution Plan is not approved by the Committee of Creditors. For the said purpose, the reliance is placed upon the decision of the Hon’ble Supreme Court and Hon’ble NCLT Principal Bench”.

Before arriving at our opinion, we have examined Regulation 12(2) of IBBI, (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 (hereinafter referred as “Regulations”) as prevailing on the date of filing of the claim which has been relied upon by the Resolution Professional and is profitably reproduced below:

The above Regulation clearly stipulates that a creditor may submit his claim with proof to the Resolution Professional before 90^th day of the Insolvency Commencement Date. In the present case, CIRP commenced on 04.08.2021, the last date of the submission of the claim was 27.08.2021 and the 90^th day of insolvency commencement date is 02.11.2021. The Applicant has submitted the claim on 13.07.2023. There is delay of 687 days from the last date of the submission of the claim and delay of 617 days from the cut-off date which is 90^th days from the insolvency commencement date as provided under Regulation 12(2) of the Regulations. Therefore, even under Regulation 12(2) of Regulations the claim of the Applicant cannot be entertained.

The cases relied upon by the Applicant do not come to the help of the Applicant. The Adjudicating Authority, the Hon’ble NCLAT and the Hon’ble Supreme Court have condoned the delay in filing of claims only on those occasions where the delay has been explained with sufficient causes and where substantial grounds are made out. In this case, reason for delay has been explained as being unaware about the initiation of CIRP against the Corporate Debtor which, in the opinion of this Bench, is not sufficient ground to condone the delay. In this regard, it is important to refer and reproduce para 20 of the judgment of Hon’ble Supreme Court in the case of M/s. RPS Infrastructure Ltd. Vs. Mukul Kumar & Anr. in Civil Appeal No. 5590 of 2021 wherein it has been observed as under:

The Hon’ble Supreme Court in the above decision have observed and held that when pubic announcement is made of the CIRP through newspaper, this would constitute deemed knowledge on the appellant and in any case, the plea of not being aware of newspaper pronouncement is not the one which should be available to a commercial party. In the present case, the Applicant has given a loan of Rs. 3,50,00,000/- at the rate of 18% per annum against execution of demand promissory note and has also converted outstanding interest amount of Rs. 16,42,500/- into principal loan amount. All this goes to show that the Applicant is a commercial party as it is not a friendly loan extended to the Corporate Debtor without interest.

Accordingly, the plea taken by the Applicant being also a commercial party that he was not aware about the initiation of the CIRP against the Corporate Debtor cannot be considered as reasonable or sufficient cause or substantial ground to condone substantial delay of 687 days from the last date of the submission of the claim and delay of 617 days from the cut-off date. The applicant has failed to make out a case of reasonable or sufficient ground for condonation of delay.

The Applicant has relied upon the judgment of Hon’ble Supreme Court in the case State Tax Officer (1) Vs. Rainbow Papers Limited in Civil Appeal No. 1661 of 2020 wherein the Hon’ble Supreme Court in para 58 have held as under:

The Applicant also relied upon the order passed by the NCLT, Principal Bench, New Delhi in the case of Edelweiss Asset Reconstruction Co. Pvt. Ltd. Vs. Adel Landmarks Ltd. wherein the Principal Bench have held that the claims of the Applicant shall not be rejected on the ground of delay. In this regard, it is stated that the said decision of Hon’ble Principal Bench is dated 06.06.2019 and it was in the initial stage of the law under IBC being evolving. On the aspect of delay, reliance has been placed by the Resolution Professional upon the order passed by the Hon’ble NCLAT, Chennai Bench in the case of Mr. Toral Reathod Vs. Mr. Gopalsamy Ganesh Babu in Comp. Appeal (AT)(CH)(Ins). No. 143 of 2023 wherein the Hon’ble NCLAT Chennai Bench have held as under:

Clearly, condonation of delay is not right of the Applicant but has to be considered in each case based on the facts and circumstances of each case and only if delay is explained by sufficient cause/ substantial ground then the delay can be condoned. In other words if sufficient cause / substantial ground to condone the delay is not made out, the same cannot be condoned as IBC is a time bound process. In the instant case, the applicant has given explanation of delay as he being not aware of the CIRP proceeding of the Corporate Debtor which is neither substantial ground nor can constitute a sufficient cause.

There is another reason for rejection of the present application. In this case, the request of the Resolution Plan has already been made and as per the facts stated, Resolution Plans have been received which are under active consideration of the CoC and the CoC is in talks and negotiations with the resolution applicants for maximization of the value. At this stage, if any additional claims are allowed to be admitted that too after substantial delay beyond the period provided under Regulation 12(2) of the Regulations, then it will adversely affect the process of Resolution and it may have the effect of derailing it which goes against the objective of the Insolvency and Bankruptcy Code.

The claim of the Applicant also suffers from the doctrine of laches. The traditional meaning of the word laches is the negligence to follow one’s legal duty. It is derived from the Latin word ‘laxare’ which means to lose. In legal sense, laches means failure to assert or observe one’s legal right or privilege. The doctrine is based on the Latin Maxim Vigilantibus Non Dormientibus Aequitas Subvenit which means that “Equity aids the vigilant, not the ones who sleep over their rights”. Accordingly, the Courts will not help people who sleep over their rights and help only those who are aware and vigilant about their rights.

In the case of Tilokchand Motichand Vs H.B. Munshi, judgment was delivered by Hon’ble M. Hidayatullah, C.J. , wherein it was held that:

Also, in the case of Gian Singh v. High Court of Punjab and Haryana, the Court rejected their contentions stating that there were no valid reasons for justifying the delay of eleven years and therefore their petitions were dismissed.

In the instant case, it is noticed that the loan was given in the year 2017 @ 18% interest per annum. The Applicant neither received the interest amount after the period 30.06.2017 nor received back the principal loan amount. This bench made a pointed query to the Applicant whether any reminder/notice was sent for the payment of the due amount or any proceedings were initiated against the Corporate Debtor during the period from 2017 to 2023. No action whatsoever was taken by the Applicant to recover back its loan amount with interest except filing of claim before the Resolution Professional on 13.07.2023. Therefore, such stale claims cannot be allowed to be entertained by this Bench on account of doctrine of laches also.

In view of the above discussions, this bench is of the considered view that the Applicant ought to have been vigilant enough to find out that the Corporate Debtor was undergoing CIRP and should have filed his claim in due time. Therefore, the above Application filed by the Applicant is liable to be rejected.

Accordingly, the above Application is rejected and stands disposed off.