Relief under IBC 60(5) on Liquidator Rejection of Claims Unavailable when Remedy under IBC 42 is not Used: NCLAT [Read Order]
The Tribunal viewed that when section 42 of the code provided a clear remedy against the rejection or acceptance of the claims by the liquidator which has not been availed of, the Appellant cannot now seek the same relief by invoking the provisions of 60(5) of the code
![Relief under IBC 60(5) on Liquidator Rejection of Claims Unavailable when Remedy under IBC 42 is not Used: NCLAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/02/NCLAT-Insolvency-and-Bankruptcy-Code-IBC-Section-605-of-IBC-TAXSCAN.jpg "Relief under IBC 60(5) on Liquidator Rejection of Claims Unavailable when Remedy under IBC 42 is not Used: NCLAT [Read Order]")
The National Company Law Appellate Tribunal (NCLAT) has held that relief under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (Code) cannot be claimed against rejection of claims by the liquidator when the remedy provided under section 42 of the code against such decision has not been resorted to. On June 14, 2017, M/s Varun Resources Ltd., the corporate debtor, was admitted to...
The National Company Law Appellate Tribunal (NCLAT) has held that relief under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (Code) cannot be claimed against rejection of claims by the liquidator when the remedy provided under section 42 of the code against such decision has not been resorted to.
On June 14, 2017, M/s Varun Resources Ltd., the corporate debtor, was admitted to the Corporate Insolvency Resolution Proceeding (CIRP). From July 23–27, 2017, Asean International Limited (Appellant) provided bunkers, fuels, fresh water, oil, and other supplies to three vessels owned by the Corporate Debtor at the Resolution Professional's ("RP") request. Additionally, the appellant purchased these items from Gujarat Marines and Dushyant Patel, two subcontractors.
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The corporate debtor was ordered to be liquidated after no resolution plan was filed. On March 22, 2019, the appellant submitted a tardy claim to the liquidator. On March 30, 2019, the Liquidator denied the claim, citing the fact that it was filed more than two months after the deadline specified in the public announcement.
The Respondent-Liquidator notified the Appellant on September 30, 2022, that Dushyant Patel and the Gujarat Marines, their subcontractors, had launched a case in the Admiralty Court to recover payment for the goods that were provided. In their correspondence, the Liquidator asked the Appellant to furnish a No Objection Certificate (NOC) so that the subcontractors' claims may be resolved independently of the Appellant's. Under Section 60(5) of the Code, the appellant filed an Interlocutory Application (IA) on March 27, 2023, contesting the Liquidator's communication from February 20, 2023, requesting a NOC.
The contested order dismissing the IA was issued by the Adjudicating Authority on October 17, 2023. This appeal has been requested because the parties are upset about this order. The appellant argued that the appellant was entitled to payment of the amount, including interest on the delayed payment, as shown on the invoice because it had an interest clause for late payment and the liquidator had accepted the bills without protest.
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Additionally, it was asserted that the costs expended for the supplies qualified as CIRP costs because the Appellant made the supply at the Corporate Debtor's request through the RP during CIRP in order to maintain the Corporate Debtor as a going concern. In contrast, the respondent argued that a creditor loses all claim rights under the waterfall method if their claim is denied during the liquidation process.
When the appellant filed their belated claim before the liquidator on March 22, 2019, it was further contended that the parties had never agreed on the interest component and that the appellant had not asserted interest in their claim. In the current case, the interest claim was submitted significantly later. Due to the appellant's blatant failure to submit their claim, which included interest for late payment, within the deadline specified by Regulation 16 of the Liquidation Process Regulations, the liquidator rejected the claims.
The Tribunal noted that the liquidator has the right to review the creditors' claims in accordance with section 42 of the code. Within 14 days, the creditors have the opportunity to contest the liquidator's decision to accept or reject the claims. The Adjudicating Authority will decide any disagreement between the liquidator and the stakeholder claimant. Based on the aforementioned, it was noted that the appellant in this case had not only neglected to submit their claim to the liquidator on time, but also had not taken any action to contest the liquidator's judgment even after their late claim was denied.
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The Tribunal viewed that when section 42 of the code provided a clear remedy against the rejection or acceptance of the claims by the liquidator which has not been availed of, the Appellant cannot now seek the same relief by invoking the provisions of 60(5) of the code.
The New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) held that “we agree with the Adjudicating Authority that seeking of NOC from the Appellant by the Liquidator in respect of the dues of suppliers of the sub-contractors was within the scope of his duties to protect the assets of the Corporate Debtor and do not find any cogent grounds which show that the Liquidator was found wanting in his conduct.”
To Read the full text of the Order CLICK HERE
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