NCLAT Upholds Liquidator's Rejection of SEBI's Post Liquidation Claim

SEBI's Claim Filed After Liquidation Commencement Date Deemed Inadmissible by NCLAT

In a significant judgment, the National Company Law Appellate Tribunal (NCLAT) has dismissed the appeal filed by the Securities and Exchange Board of India (SEBI) against the rejection of its claim by the Liquidator in the case involving M/s. Annies Apparel Pvt. Ltd. The appeal arose from an order passed by the National Company Law Tribunal (NCLT), which dismissed SEBI's application seeking admission of its claim filed post-liquidation commencement date.

The case centers around the liquidation proceedings of Annies Apparel Pvt. Ltd., which commenced on March 15, 2021. SEBI's claim, amounting to Rs. 21.80 lakhs, was based on an Adjudication Order dated October 31, 2022, imposing a monetary penalty on the Corporate Debtor for alleged financial mismanagement and diversion of funds. SEBI filed its claim with the Liquidator on June 20, 2023, well beyond the statutory timeline stipulated for claims submission.

The NCLAT, presided over by Justice Ashok Bhushan and Barun Mitra, upheld the Liquidator's decision to reject SEBI's claim, emphasizing the sacrosanct nature of the liquidation commencement date for claims submission. The Tribunal clarified that claims arising or crystallizing after the liquidation commencement date cannot be entertained under the Insolvency and Bankruptcy Code, 2016 (IBC), and the IBBI (Liquidation Process) Regulations, 2016.

The judgment reaffirms the statutory framework under IBC, which mandates that claims must be based on liabilities existing as of the liquidation commencement date to ensure orderly liquidation and adherence to established timelines. SEBI's reliance on the Sundaresh Bhatt judgment, which discusses the Liquidator's obligation to ensure statutory dues assessment, was deemed distinguishable by the Tribunal. The NCLAT held that claims arising post-liquidation commencement date are not entertained under the IBC framework, even for statutory bodies like SEBI.

This decision underscores the importance of adhering to statutory timelines in liquidation proceedings, emphasizing that all entities, whether statutory or not, must comply with the timelines provided under the IBC. The Tribunal's ruling serves as a precedent, reinforcing the inviolable sanctity of the liquidation commencement date in insolvency proceedings.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 (IBC) - Liquidation commencement date is sacrosanct for submission and admission of claims by operational creditors, including statutory bodies like SEBI. Claims arising or crystallized after the liquidation commencement date cannot be entertained by the Liquidator.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 61, IBBI (Liquidation Process) Regulations, 2016 Regulations 12, 13, 16, 17, Insolvency and Bankruptcy Code, 2016 Section 53.

Securities And Exchange Board Of India v. Rajiv Bajaj Liquidator, M/s. Annies Apparel Pvt. Ltd., (NCLAT)(Principal Bench, New Delhi) : Law Finder Doc Id # 2821681