Any Claims Assessed After Liquidation Commencement Date Cannot Be Accepted By Liquidator: NCLAT New Delhi

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member), held that when the claim has to be filed on the liquidation commencement date any claims subsequent including any on the basis of assessment subsequent to the liquidation commencement date cannot be given any credence by the liquidator.

Brief Facts

The corporate debtor was ordered to be liquidated and liquidation started on October 9, 2019. The claims during the liquidation process had to be filed within a time period specified in the IBC and Liquidation Regulations Process. An amount of Rs. 16,58,159 was claimed by Assistant Provident Fund Commissioner (appellant) under the provident fund laws. This amount was related to the period when the liquidation had not commenced. Two orders for claiming amounts under section 7A and section 7B were passed on 10.03.2021 and 21.04.2021, respectively. Interest along with the payment was also claimed due to delay in making payment.

The claims for interest and damages were not admitted by the liquidator (respondent) on the ground that they were assessed after the commencement of liquidation of the corporate debtor. An application bearing I.A. No. 739 of 2023 was filed before the adjudicating authority against the rejection. However, the authority also agreed with the liquidator and rejected the claims as they had been assessed after the commencement of liquidation of the corporate debtor.

The present appeal has been filed against the decision of the NCLT.

Contentions

The appellant contended that the NCLT erred in rejecting the claims as they accrued before the commencement of the liquidation proceedings. It was further submitted that the claimed amount was entitled for statutory interest at 12% per annum which should have been granted by the NCLT before the liquidation proceedings started. It was further argued that it does not matter whether the claims were assessed after the liquidation commencement date as they accrued before that date.

Per contra, the respondent submitted that the claims for damages and interest were assessed after lapse of a significant time till then the liquidation proceedings had already started. It was further argued that the claimed amount was not submitted when proof of other claims were provided to the liquidator therefore it could not be claimed now. The respondent referred to the NCLAT judgment in Regional Provident Fund Commissioner vs. Manish Kumar Bhagat wherein it was held that the claims assessed or arising after the liquidation commencement date could not be accepted under the IBC. It was further contended that since the IBC allows the claims to be admitted till the liquidation commencement date and not the claims which arise after the commencement of the proceedings.

NCLAT's Analysis

The NCLAT observed that a timeline is provided under the IBC within which the claims have to be submitted. The claims after the deadline cannot be accepted. During liquidation proceedings, the claims can be filed arisen as of the liquidation commencement date and not afterwards. The tribunal further observed that since in the present case, the claims were assesses during liquidations proceedings, they could not be admitted by the liquidator. Therefore, the liquidator was justified in rejecting the claims. It was held that there is no dispute that assessment for the interest was done in the year, 2021 much after the liquidation commencement date. The claim under Regulation 12 and 16 of Liquidation Regulation, 2016 had to be filed as on liquidation commencement date. When the claim has to be filed on the liquidation commencement date any claims subsequent including any on the basis of assessment subsequent to the liquidation commencement date cannot be given any credence by the liquidator

The tribunal agreed with the respondent reliance on the NCLAT judgment in DBS Bank India Limited Vs. Kuldeep Verma (2024) wherein it was held that When a statute provides for liquidation commencement date as a date up to which claims can be filed and proved, no claim thereafter can be entertained by the Liquidator.

Conclusion

The NCLAT concluded that the claims assessed after the commencement of liquidation date could not be accepted by the liquidator. The Tribunal further held that the claim under Section 14B which was subsequent to the CIRP could not have been accepted. Accordingly, the present appeal was not allowed and dismissed.

Case Title: Assistance Provident Fund Commissioner (Legal), EPFO v. Chandra Prakash Jain (Liquidator)

Case Reference: Company Appeal (AT) (Insolvency) No. 1743 of 2024

Court: NCLAT, New Delhi

Judgment Date: 24/09/2024

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