NCLT Rejects Customs Department's Claim in Rubber Wood India Liquidation Case

Inordinate Delay of 787 Days in Filing Claim Cited; Government Dues Not Given Preferential Treatment

The National Company Law Tribunal (NCLT) Kochi Bench has dismissed the appeal by the Assistant Commissioner of Customs seeking condonation of a 787-day delay in filing a claim in the liquidation proceedings of Rubber Wood India Private Limited. The tribunal upheld the liquidator's decision to reject the claim, citing strict adherence to prescribed timelines under the Insolvency and Bankruptcy Code, 2016.

The case, Assistant Commissioner of Customs v. Mr. Renahan Vamakesan, Liquidator of Rubber Wood India Private Limited, revolved around the Customs Department’s attempt to secure a share of the liquidation proceeds as an operational creditor. The department had claimed Rs. 64,33,262/- comprising duty and interest, which was rejected due to the delay in filing.

During the proceedings, it was highlighted that the Corporate Debtor had imported goods under the Export Promotion Capital Goods Scheme but failed to fulfill the export obligations, leading to a customs duty demand confirmed in 2009. Subsequent appeals in customs forums did not yield relief, and the claim was filed much later after the liquidation commenced, exceeding the statutory timeframe.

The tribunal emphasized that the timelines set by the Insolvency and Bankruptcy Code are mandatory and aim to ensure expeditious resolution processes. It noted that pendency before other forums cannot justify the delay, and the Customs Department failed to demonstrate sufficient cause for the inordinate delay.

Further, the tribunal underscored that government dues do not receive preferential treatment in liquidation proceedings, ranking below secured creditors and workmen's dues per Section 53 of the Code. The liquidator's rejection of the claim for post-liquidation interest was deemed lawful and consistent with the statutory framework.

The tribunal referenced several precedents, including decisions from the Supreme Court, which reinforced the necessity for adherence to timelines and due diligence by creditors, including government entities.

This ruling is a significant reaffirmation of the principles governing insolvency proceedings, emphasizing the importance of adhering to timelines to maintain the integrity and efficiency of the process.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Strict adherence to prescribed timelines for filing claims during liquidation is mandatory - Delay of 787 days in filing the claim rejected as no sufficient cause or satisfactory explanation provided for condonation of such inordinate delay.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 42, 53, Regulation 12 of IBBI (Liquidation Process) Regulations, 2016, Regulation 30 of IBBI (Liquidation Process) Regulations, 2016.

Assistant Commissioner of Customs v. Mr. Renahan Vamakesan, Liquidator of Rubber Wood India Private Limited, (NCLT)(Kochi Bench) : Law Finder Doc Id # 2811127