Timely CIRP Claim Cannot Be Rejected Despite Procedural Lapse: NCLAT Directs RP to Consider Claim under Appropriate Creditor Category [Read Order]

The National Company Law Appellate Tribunal (NCLAT) New Delhi has held that a claim submitted within the prescribed period during the Corporate Insolvency Resolution Process (CIRP) cannot be rejected merely on technical or procedural grounds. The Appellate Tribunal directed the Resolution Professional (RP) to consider the claim of Amisha In Sky Creation Pvt. Ltd. under the category of “other creditor.”

The ruling came in cross appeals arising out of the order passed by the National Company Law Tribunal (NCLT), Mumbai Bench, in the CIRP of Setubandhan Infrastructure Ltd. The appeals were heard by the bench comprising Justice Ashok Bhushan, Chairperson, and Barun Mitra, Member (Technical).

The dispute arose after Amisha In Sky Creation Pvt. Ltd. mortgaged its properties in favour of State Bank of India to enable the Corporate Debtor to secure loan facilities. Under a notarised agreement executed in 2016, the Corporate Debtor had agreed to repay the bank loan within three years and pay interest at the rate of 1.5% per month to Amisha for allowing the use of its properties as collateral security.

During CIRP, the appellant filed a claim of over Rs. 81 crore before the RP as a financial creditor. However, the RP rejected the claim on the ground that the arrangement did not constitute a financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC). The NCLT subsequently dismissed Amisha’s application challenging the rejection of the claim but simultaneously classified it as a secured financial creditor.

Before the Tribunal, the appellant argued that the mortgage transaction, coupled with the agreed interest payments, carried the commercial effect of borrowing and therefore qualified as financial debt.

The RP on the other hand contended that no actual disbursal of money had been made by Amisha to the Corporate Debtor, which is an essential requirement for classification as a financial creditor. It was further argued that merely mortgaging property to secure a bank loan could not amount to disbursal under the IBC.

While holding that the appellant could not be treated as a financial or secured financial creditor, the NCLAT observed that the claim itself had been filed within 90 days from the invitation of claims and therefore could not be rejected on the ground of delay.

Accordingly, the Tribunal directed the RP to admit the claim under the category of “other creditor,” subject to the terms of the approved resolution plan.

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