The Hon’ble Supreme Court recently in a judgement made two important observations firstly that the Resolution Professional (RP) cannot be rejected/ overlooked merely on the fact that the claim submitted appears to be in a different form other than the form in which the claim needs to be submitted.

In the instant case the claim filed by the Appellant (Greater Noida Industrial Development Authority/GNIDA) had submitted the claim under Form C of Regulation 8 CIRP Regulation, 2016 as Financial Creditor. However the RP treated the claim of the Appellant as an Operational Creditor and requested to file the said claim under Form B as an Operational Creditor of the Corporate Debtor. In the meantime COC approved the resolution plan and the same was approved/ passed by the Adjudicating Authority on 04.08.2020. Aggrieved by the same Appellant filed an application questing inter alia the resolution plan, decision of the RP to treat the Appellant as an Operational Creditor. It is submitted the NCLT dismissed the applications and aggrieved by the order of the NCLT preferred an appeal to the NCLAT which was dismissed the appeal by making an observation that since the RP had informed the Appellant about its status as an Operational Creditor and yet the appellant chose not to file the claim there file its claim and the same was not considered.

The Hon’ble Supreme Court set-aside the findings of the NCLAT & NCLT, by making observation that the forms in which the claim is to be submitted is directory in nature, and the claim cannot be rejected. The Hon’ble Court noted what is necessary that the claim must have support from the proof.

“The use of the words “a person claiming to be an operational creditor” in the opening part of Regulation 7, and the words “a person claiming to be a financial creditor” in Regulation 8, indicate that the category in which the claim is submitted is based on the own understanding of the claimant. Thus, there could be a situation where the claimant, in good faith, may place itself in a category to which it does not belong. However, what is important is, the claim so submitted must be with proof. As to what could form proof of the debt/ claim is delineated in sub regulation (2) of Regulations 7 and 8 of the CIRP Regulations, 2016.”

That the Hon’ble Court further made the observation that once a claim is submitted with proof, the RP has to verify the claim, as on the insolvency commencement date, and thereupon maintain a list of creditors containing names of creditors along with the amount claimed by them, the amount of their claims admitted and the security interest in terms of Regulation 12 of CIRP Regulations.

The appellant submitted a claim of Rs. 43,40,31,951/- as a Financial Creditor, however the dues shown payable to the appellant were Rs. 13,47,40,819/- as an Operational Creditor and they were proposed to be paid just Rs.1,34,74,082/- . Accordingly the Resolution Plan failed to acknowledge the claim of the Appellant as secured creditor even though the charge was created on the assets of the Corporate Debtor.

The Hon’ble Court added that the once the claim along-with the proof is submitted then it cannot be merely overlooked because it was filed in a different form.

“No doubt, the record indicates that the appellant was advised to submit its claim in Form B (meant for operational creditor) in place of Form C (meant of financial creditor). But, assuming the appellant did not heed the advice, once the claim was submitted with proof, it could not have been overlooked merely because it was in a different Form.”

“Here, the resolution plan fails not only in acknowledging the claim made but also in mentioning the correct figure of the amount due and payable. According to the resolution plan, the amount outstanding was Rs. 13,47,40,819/- whereas, according to the appellant, the amount due and for which claim was made was Rs. 43,40,31,951/- This omission or error, as the case may be, in our view, materially affected the resolution plan as it was a vital information on which there ought to have been application of mind.”

That while dealing with the dismissal of the recall application the Hon’ble Court observed that it is a well-known rule of statutory construction that a Tribunal or body should be considered to be endowed with such ancillary or incidental powers as are necessary to discharge its functions effectively for the purpose of doing justice between the parties. In a case of this nature, we are of the view that the Tribunal should be considered as invested with such incidental or ancillary powers unless there is any indication in the statute to the contrary.

Further, the Hon’ble Court observed that the Notice of the COC needs to be served to the Operational Creditor having more than of the debt should have been served notice of the meeting of the COC, available under Section 24 (3) (c) of the IBC but was not served to the appellant in the present case. In the instant case the same was not served to the Appellant which is against the provisions of IBC.

When the resolution plan was submitted for the consideration of the COC. The original claim of the appellant as financial creditor was denied but was treated as the Operational Creditor with lesser amount of claim.

The Court further observed that as per Regulation 38 (3) of the CIRP Regulations, 2016, the resolution plan must demonstrate that firstly, it is feasible and viable; and secondly, it has provisions for approvals required and the timeline for the same, failing which the plan requires the closer examination.

“In the instant case, the plan conceived utilisation of land owned by the appellant. Ordinarily, feasibility and viability of a plan are economic decisions best left to the commercial wisdom of the COC. However, where the plan envisages use of land not owned by the CD but by a third party, such as the appellant, which is a statutory body, bound by its own rules and regulations having statutory flavour, there has to be a closer examination of the plan’s feasibility”

The Hon’ble Court further observed that when the resolution plan envisages the necessary approvals of the statutory authority, then the plan must reflect such approval as per the CIRP Regulations.

The Hon’ble Court added that the resolution plan did not meet any parameters laid down in the section 30(2) of the IBC read with regulation 37 and 38 of the CIRP Regulations, 2016 and accordingly allowed the appeal and the resolution plan was remanded back to the COC for resubmission after the parameters set out in the provisions of the IBC.