Tribunal Upholds CoC’s Commercial Wisdom, Rejects Revised MSME Interest Claim and Challenge to Resolution Plan
In a significant ruling, the National Company Law Tribunal (NCLT) Allahabad Bench has dismissed an application filed by M/s Modern Overseas Private Limited challenging the approved resolution plan of Hind Agro Industries Limited. The judgment, delivered by Mr. Praveen Gupta and Mr. Ashish Verma, underscores the importance of adhering to the time-bound resolution process prescribed by the Insolvency and Bankruptcy Code (IBC), 2016, and reinforces the non-justiciability of the commercial wisdom exercised by the Committee of Creditors (CoC).
The case revolved around the revised claim submitted by Modern Overseas, an operational creditor, for an amount of Rs. 241.29 crore, which included interest calculated under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act). This revised claim was submitted 561 days after the initial claim and long after the completion of the claim verification process. The Tribunal held that entertaining such belated claims would defeat the objective of a time-bound resolution process under the IBC.
Furthermore, the Tribunal clarified that the interest claims under the MSME Act fall outside its jurisdiction unless previously adjudicated by a competent forum, thereby dismissing Modern Overseas’ plea for the claim’s admission. The Tribunal emphasized that the role of a Resolution Professional (RP) is not to adjudicate disputed claims but to verify and collate them, thereby ruling out the admission of the enhanced claim based on unverified interest under the MSME Act.
Modern Overseas also challenged the resolution plan approved by an 87.54% majority of the CoC, citing various alleged irregularities in the Corporate Insolvency Resolution Process (CIRP). However, the Tribunal noted that Modern Overseas lacked the locus standi to challenge the commercial decisions of the CoC, which are deemed non-justiciable by legal precedents, including the Supreme Court ruling in the Essar Steel case.
Responding to the allegations, the RP and the Successful Resolution Applicant (SRA) contended that the revised claim was made at a belated stage and lacked supporting documentation, thus justifying its non-admission. They further asserted that the resolution plan complied with all statutory requirements and was transparently evaluated and approved by the CoC.
The Tribunal’s judgment reaffirms the principle that creditors cannot reopen claim processes long after their closure and underscores the sanctity of the CoC’s decision-making in insolvency proceedings. This ruling is expected to have implications for future insolvency cases, particularly concerning the timeliness and adjudication of claims under the IBC framework.
Bottom line:-
Insolvency and Bankruptcy Code (IBC) - A modified claim submitted by an Operational Creditor at a highly belated stage after the prescribed period cannot be entertained as it defeats the objective of a time-bound resolution process under the Code.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 60(5), 29A, 30(2), 30(4); Micro, Small and Medium Enterprises Development Act, 2006
