NCLAT upheld the rejection of the belated claim and interest, affirming the finality of the Liquidator’s decision under Section 42 of the IBC.
On Thursday, 20th February 2025, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Arun Baroka, reviewed the appeal and held that a creditor’s claim, including interest, must be submitted within the prescribed liquidation timeline. Failure to challenge the rejection under Section 42 of the IBC renders the decision final, precluding any later attempts to revive the claim under Section 60(5). The NCLAT further held that the Appellant’s refusal to provide a No Objection Certificate (NOC) was unjustified and did not impact the validity of the Liquidator’s actions.
The present appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016, arose from the order dated 17.10.2023, passed by the National Company Law Tribunal (Mumbai Bench-I), whereby IA No. 1795 of 2023 was dismissed, and the claim submitted by the Appellant before the Liquidator was rejected. The Corporate Debtor, M/s Varun Resources Ltd., was admitted into the Corporate Insolvency Resolution Process (CIRP) on 14.06.2017. The Appellant supplied bunkers, fuels, fresh water, and oil to the Corporate Debtor's vessels at the request of the Resolution Professional (RP) between 23-27 July 2017. The Appellant raised invoices totalling USD 173,182.97, which the Respondent acknowledged. However, as no resolution plan was approved, the Corporate Debtor proceeded into liquidation, with the Liquidator issuing a public announcement on 06.12.2018, setting 02.01.2019 as the last date for submission of claims. Despite being requested on 21.01.2019 to submit their claim by 28.01.2019, the Appellant failed to do so, ultimately submitting their claim on 22.03.2019, which was rejected for being beyond the prescribed period.
Subsequently, on 25.06.2019, the Appellant issued a debit note incorporating interest, raising the total claim amount to USD 252,249.85, and sent a demand notice on 01.07.2019. Meanwhile, the Liquidator informed the Appellant that proceedings had been initiated by subcontractors before the Admiralty Court and requested a No Objection Certificate (NOC) from the Appellant to settle these claims separately. The Appellant refused to provide the NOC on 21.02.2023. On 27.03.2023, the Appellant filed IA No. 1795 of 2023 under Section 60(5) of the IBC, challenging the Liquidator’s request for NOC and claiming an increased amount of USD 364,257.29. The Liquidator contended that the Appellant’s refusal to provide the NOC was prolonging the resolution process, and subsequently, the Bombay High Court decreed the settlement agreements of the subcontractors on 28.04.2023.
The Appellant argued that their supplies were made at the RP’s request and should be treated as CIRP costs, given priority under Section 53(1)(a) of the IBC. They also claimed that the invoices included an interest rate of 2% per month on delayed payments, which was never objected to. In support, they cited precedents such as Prashant Agarwal v. Vikash Parasrampuria and Dakshin Gujarat VIJ Company Ltd. v. M/s ABG Shipyard Ltd. The Respondent opposed the maintainability of IA No. 1795 of 2023, arguing that the Appellant had failed to challenge the claim rejection under Section 42 of the IBC, citing Ethenic Agencies Pvt. Ltd. v. K.G. Somani to support the proposition that a rejected claim could not be revived in liquidation proceedings. Additionally, the Respondent contended that the Appellant’s interest claim of USD 191,174.12 lacked merit, as no prior demand for interest had been made in the original claim submission.
The Adjudicating Authority rejected the Appellant’s claim, which led to the present appeal. The NCLAT found that the Liquidator was bound by the framework of the IBC and the Liquidation Process Regulations, which required claims, including interest, to be submitted within the prescribed timeline. The Appellant had failed to do so and attempted to claim interest only later through a debit note dated 25.06.2019, which was not supported by the original order confirmation. The Tribunal held that the Appellant had failed to challenge the Liquidator’s decision under Section 42 of the IBC, leading to the finality of the rejection, and that invoking Section 60(5) of the IBC to circumvent statutory remedies was impermissible.
The Appellant also alleged coercion in obtaining an NOC regarding the settlement of subcontractors’ claims. However, the NCLAT found no evidence of undue pressure by the Liquidator, noting that the request was only to confirm the settlement amount. The Appellant’s refusal to issue an NOC was viewed as an attempt to delay the liquidation process. Consequently, the NCLAT upheld the Adjudicating Authority’s decision, affirming that the Appellant’s claim for interest was rightly rejected due to non-compliance with prescribed procedures, and ruled that the Appellant could not revive their claim after failing to exercise their statutory remedy under Section 42 of the IBC.
Mr. Lzafeer Ahmad BF, Mr. Shubham and Mr. Arun, Advocates represented the Appellant.
Mr. Ravi Raghunath, Mr. Aditya Sharan and Mr. Aniruth Purusothaman, Advocates appeared for the Respondent.
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