The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member) was hearing and observed that the Memorandum of Understanding (MoU) and Ledger Statements of the Corporate Debtor are Insufficient Proof to Accept the Claim as a Financial Debt.
The Appeals were filed to challenge the order dated 31.03.2023 issued by the National Company Law Tribunal, Mumbai Bench-I. The order rejected two applications, IA Nos. 721 of 2023 and IA No. 722 of 2023, filed by the Appellants seeking a direction to admit their claims.
The origin of the dispute lies in the Corporate Insolvency Resolution Process (CIRP) initiated against D.S. Kulkarni Developers Ltd. based on an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by the Bank of Maharashtra.
The Appellants, D.S. Kulkarni & Associates and D.S. Kulkarni & Company submitted claims for substantial amounts, and the Resolution Professional (RP) requested supporting documents to substantiate their claims. Despite reminders and opportunities, the Appellants failed to provide the required documents. Consequently, their claims were rejected by the RP.
The Adjudicating Authority, after considering the submissions, rejected IA Nos. 721 and 722 of 2023 on 31.03.2023. The Authority concluded that the Resolution Plan had been approved by the Committee of Creditors (CoC) on 13.08.2021, and the delay in filing the applications, more than one and a half years later, was not justified. The Adjudicating Authority found no illegality or irregularity in the RP's decision to reject the claims.
During the hearing of the Appeals, the Appellants argued that they had submitted claims within the stipulated time, accompanied by Memorandum of Understanding (MoU) and Ledger extracts. They contended that the Adjudicating Authority erred in rejecting their applications despite sufficient materials proving the advances made to the Corporate Debtor.
However, the RP and Successful Resolution Applicant (SRA) opposed the Appeals, emphasizing the Appellants' failure to submit necessary documents despite repeated requests. The SRA argued that since the Resolution Plan had been approved and not challenged, the Appeals should be dismissed.
Upon careful consideration, the Appellate Authority scrutinized the documents submitted by the Appellants, specifically the MoU and Ledger extracts. It concluded that the MoU and Ledger Statements did not establish the transactions as financial debt under the Insolvency and Bankruptcy Code. The Authority affirmed the Adjudicating Authority's decision, stating that the delay in filing the applications, well after the approval of the Resolution Plan, was unjustified.
In conclusion, the Appeals were dismissed, and no costs were imposed. The Adjudicating Authority's decision to reject IA Nos. 721 and 722 of 2023 were upheld, emphasizing the Appellants' failure to provide adequate documents and the untimeliness of their applications.