Reflected Homebuyer Claims Cannot Be Ignored in Resolution Plan Despite Belated Filing: NCLAT
- REEDLAW
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REEDLAW Legal News Network reports: In a significant ruling on the treatment of homebuyer claims under the Insolvency and Bankruptcy Code, 2016, the Appellate Tribunal held that a claim arising from a real estate allotment could not be disregarded merely on the ground of delayed filing where the allotment and payments were duly reflected in the records and Information Memorandum of the Corporate Debtor, and such liabilities were required to be transparently placed before the Resolution Applicant prior to approval of the resolution plan.
The National Company Law Appellate Tribunal, New Delhi Bench, while adjudicating a Company Appeal, examined the manner in which a homebuyer’s claim had been excluded despite its reflection in the Corporate Debtor’s records and Information Memorandum. The Bench comprising Justice Mohd. Faiz Alam Khan (Judicial Member) and Mr. Naresh Salecha (Technical Member) observed that where such reflected liabilities existed, the Resolution Professional was duty-bound to bring them to the notice of the Resolution Applicant through an appropriate addendum to the resolution plan before its consideration by the Adjudicating Authority, failing which the resolution process would operate inequitably and contrary to the objectives of the Code.
The Appellate Tribunal considered an appeal filed by the Appellant, a homebuyer, challenging the rejection of a belatedly filed claim during the Corporate Insolvency Resolution Process of the Corporate Debtor. The CIRP had been initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016, and a Resolution Professional had issued a public announcement fixing a deadline for submission of claims. Although the Appellant’s ownership of the residential unit and the payments made towards the unit were undisputed and duly reflected in the records of the Corporate Debtor, the Appellant submitted the claim after the approval of the resolution plan by the Committee of Creditors. The Resolution Professional declined to admit the claim on the ground of delay, and the Adjudicating Authority dismissed the Appellant’s application seeking its admission.
The Appellant contended that the delay occurred due to a lack of knowledge of the CIRP and circumstances arising from the COVID-19 pandemic, and further argued that the Resolution Professional was duty-bound to consider the claims of homebuyers whose details were reflected in the books of the Corporate Debtor, even if formal claims were not filed within the prescribed timeline. Reliance was placed on precedents holding that timelines for submission of claims were directory and that claims stood extinguished only upon approval of the resolution plan by the Adjudicating Authority, not merely upon approval by the Committee of Creditors. The Respondents opposed the appeal, asserting that the CIRP was a time-bound process and that admission of belated claims after approval of the plan by the Committee of Creditors would disrupt the resolution process and prejudice the Successful Resolution Applicant.
Upon examining the record, the Appellate Tribunal found that while a claim filed after approval of the resolution plan by the Committee of Creditors could not be formally admitted, the liabilities of homebuyers whose details and payments were reflected in the records of the Corporate Debtor could not be ignored altogether. Relying on earlier decisions of the Appellate Tribunal, as affirmed by the Supreme Court, it was held that non-consideration of such reflected claims would lead to inequitable and unfair resolution. The Tribunal observed that the Resolution Professional ought to have placed the details of such homebuyers before the Resolution Applicant, enabling appropriate consideration through an addendum to the resolution plan prior to its approval by the Adjudicating Authority.
Accordingly, the Appellate Tribunal set aside the impugned order of the Adjudicating Authority and allowed the appeal to the limited extent of directing that the Appellant’s claim, as reflected in the Information Memorandum and records of the Corporate Debtor, be dealt with by the Resolution Applicant through an addendum to the resolution plan. The Resolution Professional was directed to furnish the relevant details to the Resolution Applicant, the addendum was to be placed before the Committee of Creditors for consideration, and the Adjudicating Authority was directed to consider the same at the stage of approval of the resolution plan. Parties were left to bear their own costs.
Mr. Archit Jain, Mr. Dhananjai Shekhawat, Ms. Dharni Sharma, Mr. Shantanu Singh Chandel, Advocates, represented the Appellant.
Ms. Varsha Banerjee, Mr. Akash Srivastava, Advocates, appeared for the Respondent No. 1.
Mr. Prithu Garg, Mr. Shivam Singh, Mr. Ashutosh Arvind Kumar, Advocates, appeared for the Respondent No. 2/SRA.
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