In a recent judgement of the New Delhi National Company Law Appellate Tribunal ( NCLAT ), has held that Resolution Professional cannot entertain any claims arising after the commencement of the Corporate Insolvency Resolution Process ( CIRP ).
The Appellant, Gujarat Urja Vikas Nigam Limited, is a wholly owned Government of Gujarat Undertaking, engaged in bulk purchase and sale of power on behalf of state-owned distribution licensees in Gujarat, entered into a Power Purchase Agreement ( PPA ) dated 29.05.2007 with Adel Landmarks Private Limited ( Corporate Debtor ) for setting up a wind power project in Gujarat.
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The Appellant alleged that the Corporate Debtor failed to supply power since March 2015, which constituted a ‘default’ under the PPA. A default notice dated 15.06.2019 and a termination notice dated 25.11.2019 were issued, seeking compensation of Rs. 3.36 Crores. No response was received from the Corporate Debtor.
In the interim, Edelweiss Asset Reconstruction Company Limited, a Financial Creditor, filed a petition under section 7 of the Insolvency and Bankruptcy Code ( IBC ) before the National Company Law Tribunal (NCLT) to trigger CIRP against the Corporate Debtor. On 05.12.2018, the NCLT commenced CIRP against the Corporate Debtor with a moratorium under Section 14 of IBC. Later the Appellant filed a petition before the Gujarat Electricity Regulatory Commission ( GERC ) for recovery of the amount owed under the terminated PPA. The Appellant was not informed of the CIRP initiation until 13.01.2022.
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After becoming aware of the CIRP proceedings, the Appellant withdrew the GERC petition with liberty. Thereafter, the Appellant filed an application before the NCLT, Delhi ( Adjudicating Authority ), seeking a direction for the RP to reconsider its claim of Rs. 3.36 Crores. The NCLT rejected the claim on 25.04.2024, stating it was filed after the initiation of CIRP.
The Appellant filed the appeal under Section 61 of IBC against the impugned order dated 2.04.2024.
The appellant submitted that the termination of the PPA was valid due to the ‘default’ of the Corporate Debtor in terms of the PPA. Section 14 of IBC does not prevent termination of the PPA as termination of the PPA is not a ‘proceeding’ within the scope and meaning of the section.
The Appellant was entitled to file his claims at any time before approval of the Resolution Plan by the Committee of Creditors ( CoC ), i.e., before 15.09.2022. The claims arising after the CIRP should not be deemed discharged.
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The Principal Bench comprising Mr. Justice Rakesh Kumar Jain ( Judicial Member ), Mr. Naresh Salecha ( Technical Member ) and Mr. Indevar Pandey ( Technical Member ) observed that the Appellant was required to file its claims by 05.03.2019 in terms of Regulation 12 of the CIRP Regulations. The Appellant’s claim was filed on 01.07.2021, with an inordinate delay of 849 days.
The RP could entertain no new claims, as it would undermine the time-bound process under IBC.
The Tribunal stated that the Appellant is entitled to initiate suitable recovery proceedings for any recovery, as per the law, but cannot raise claims arising after the CIRP date.
The Tribunal observed that the Appellant’s argument that the claim was filed before the approval of the Resolution Plan was unconvincing. The Tribunal relied on the judgement of the Supreme Court’s judgment in RPS Infrastructure Limited v. Mukul Kumar & Another [(2023) 10 SCC 718], which held that the mere fact that the Resolution Plan was not yet approved did not allow for the CIRP to be extended indefinitely.
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The Tribunal held that “There is a clear law that Resolution Professional can only entertain claims due and filed w.r.t. CIRP commencement date and not due to subsequent event, for which claimant might have other legal remedy.”
Further, concluded that the Adjudicating Authority had rightly rejected the Appellant’s claim.
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