NCLAT Rejects the Corporate Debtor’s Late Financial Claim after CIRP Approval

Introduction

In the matter of Kotak Mahindra Bank Ltd v. Sandeep Goel RP for Sarvottam Realcon Pvt Ltd.[i], an appeal was filed by Kotak Mahindra Bank i.e., the Appellant against the order of the adjudicating authority (‘AA’), where the Hon’ble National Company Law Appellate Tribunal (‘NCLAT’) had rejected the late financial claim of the Appellant, which was submitted after 738 days of the deadline from the subsequent approval of the corporate insolvency resolution process (‘CIRP’).

Brief Facts

• Kotak Mahindra Bank (‘Appellant’) had filed this appeal challenging the order of the National Company Law Tribunal, Delhi i.e., the AA which had rejected the prayer of the Appellant to condone the delay of 738 days for filing its claim.

• The CIRP was initiated on 09.07.2021, followed by a public announcement on 14.07.2021. The resolution plan (‘Plan’) was approved on 24.12.2022, and the Appellant filed its claim in August 2023.

• The Appellant had acquired the assignment from PNB Housing (‘PNB’), where PNB had previously held a mortgage on a single flat owned by one homebuyer. The records of the corporate debtor i.e., the Appellant had supposedly shown payments received from the said homebuyer, but the resolution professional (‘RP’) 

Held:

• The NCLAT upheld the decision of the AA and dismissed the appeal.

• The AA had emphasised in its decision that timely participation by all stakeholders was crucial to avoid unnecessary delays and ensure the efficient resolution process as laid down in the Insolvency Bankruptcy Code, 2016 (‘IBC’), and had also held that all parties involved must act in a timely and appropriate manner to prevent the insolvency process from becoming an endless cycle.

• The NCLAT dismissed the appeal and noted that the Appellant not being a financial creditor (‘FC’) in a class should have exercised due diligence before taking the assignment from PNB, considering that the Plan had already been approved.

Conclusion

This decision emphasises the importance of adhering to timelines in the CIRP. FCs must exercise due diligence both before and during the CIRP. The dismissal of the Appellants’ belated claim after the approval of the Plan serves as a cautionary example, reinforcing the principle that rights must be asserted promptly within the strict framework of the IBC. This decision also plays a pivotal role in maintaining the integrity and efficiency of the CIRP, preventing undue disruptions to approved resolution plans by late claims.

End Note

[i] 2024 SCC OnLine NCLAT 113

Authored by Aishwarya Pawar, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.