Financial Creditor Status Under IBC Demands Documented Payment and Timely Claim Submission
- REEDLAW
- Oct 14
- 3 min read
REEDLAW Legal News Network reports: In a pivotal ruling, the National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, reaffirmed that only claims substantiated by valid and verifiable proof of financial disbursement can qualify as those of a Financial Creditor under the Insolvency and Bankruptcy Code. The Appellate Tribunal clarified that once a resolution plan is approved, any claim not previously admitted cannot be reopened, thereby ensuring procedural finality and promoting certainty in the corporate insolvency process.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Mohammad Faiz Alam Khan (Judicial Member) and Mr. Arun Baroka (Technical Member), while adjudicating a Company Appeal, held that only claims substantiated by valid and verifiable proof of financial disbursement can be recognised as those of a Financial Creditor under the Insolvency and Bankruptcy Code. The Tribunal further clarified that any claim not admitted prior to the approval of the resolution plan cannot be revived at a later stage, emphasising the importance of maintaining the sanctity, finality, and certainty of the insolvency resolution framework.
The Appellant challenged the order of the Adjudicating Authority, which dismissed the application seeking recognition as a Financial Creditor of the Corporate Debtor. The Appellant claimed rights over a residential unit originally booked by his mother, and asserted possession based on a registered Agreement to Sell and related documents. During the CIRP of the Corporate Debtor, the Appellant filed his claim and was reflected in proceedings, but with 0% voting rights; after a resolution plan was approved, the successful resolution applicant-initiated eviction against him.
The Adjudicating Authority held that the Appellant had not substantiated his claim with clear evidence of financial disbursement, nor provided honest disclosure of facts in the claim form; the relief sought was deemed outside the Tribunal's purview. The Respondent and the Successful Resolution Applicant argued that no bank record, cheque details, or documentary proof of payment was produced, and that the Appellant's possession was unauthorised, allegedly in collusion with the previous management, which had a record of fraudulent transactions and abandoned projects.
The Tribunal found that the Appellant failed to establish any valid, verifiable financial disbursement required to qualify as a Financial Creditor under Section 5(8)(f) of the IBC. It noted contradictions in documents, including the Agreement to Sell recorded as “without possession,” conflicting with the possession letter, and highlighted the absence of proof of payments, especially cash, during demonetisation. The Appellant’s attempt to revive the claim post-resolution plan approval was held to be legally untenable. As per established jurisprudence, including decisions of the Supreme Court and Appellate Tribunal, any claims not admitted prior to a resolution plan’s approval cannot be reopened, so as to avoid undermining the finality of the process and the commercial wisdom of the CoC.
The appeal was dismissed, with the Tribunal affirming that no error or illegality existed in the order rejecting the claim, and confirming that the Appellant had failed to discharge the burden of proof and approached the Tribunal with inconsistent assertions, thus disentitling him from any relief.
Mr. Akshay Srivastava, Mr. Vivek Kumar and Ms. Raveena Paniker, Advocates, represented the Appellant.
Mr. Keshav Khandelwal, Advocate, appeared for the SRA.
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