Research Note on Filing of Claim During Insolvency Process after

Appointment of IRP/RP
Research Proposition:

Claims of creditors (herein “Operational Creditor”) who have not filed their claims within the
prescribed time period for filing of claims.

Relevant Provision of Law:

Section 8. (1) An operational creditor may, on the occurrence of a default, deliver a demand
notice of unpaid operational debtor copy of an invoice demanding payment of the amount
involved in the default to the corporate debtor in such form and manner as may be prescribed.
(Form B).

Section 14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency
commencement date, the Adjudicating Authority shall by order declare moratorium for
prohibiting all of the following, namely: -

(a) the institution of suits or continuation of pending suits or proceedings against the
corporate debtor including execution of any judgment, decree or order in any court of
law, tribunal, arbitration panel or other authority.

Regulation 6. Public announcement (INSOLVENCY AND BANKRUPTCY BOARD OF

INDIA (INSOLVENCY RESOLUTION PROCESS FOR CORPORATE PERSONS)
REGULATIONS, 2016):

(1) An insolvency professional shall make a public announcement immediately on his

appointment as an interim resolution professional.

Explanation: ‘Immediately’ means not later than three days from the date of his appointment.

(2) The public announcement referred to in sub-regulation (1) shall:

(a) be in Form A of the Schedule;

(b) be published-

(i) in one English and one regional language newspaper with wide circulation at the
location of the registered office and principal office, if any, of the corporate debtor
and any other location where in the opinion of the interim resolution professional, the
corporate debtor conducts material business operations;

(ii) on the website, if any, of the corporate debtor; and

(iii) on the website, if any, designated by the Board for the purpose,
(c) provide the last date for submission of proofs of claim, which shall be fourteen days from
the date of appointment of the interim resolution professional.

(3) The applicant shall bear the expenses of the public announcement which may be
reimbursed by the committee to the extent it ratifies them.

Clarification- The expenses on the public announcement shall not form part of insolvency
resolution process costs.

Regulation 12: Submission of Proof of Claims (INSOLVENCY AND BANKRUPTCY

BOARD OF INDIA (INSOLVENCY RESOLUTION PROCESS FOR CORPORATE
PERSONS) REGULATIONS, 2016):

(1) Subject to sub-regulation (2), a creditor shall submit proof of claim on or before the last
date mentioned in the public announcement.

(2) A creditor, who failed to submit proof of claim within the time stipulated in the public
announcement, may submit such proof to the interim resolution professional or the resolution
professional, as the case may be, till the approval of a resolution plan by the committee.

(3) Where the creditor in sub-regulation (2) is a financial creditor, it shall be included in the
committee from the date of admission of such claim:

Provided that such inclusion shall not affect the validity of any decision taken by the
committee prior to such inclusion.

Solution:

If a creditor fails to submit claim within 14 days of public announcement, the said creditor is
required by Regulation 6(2) of Insolvency & Bankruptcy Board Of India (Insolvency
Resolution Process For Corporate Persons) Regulations, 2016, to file his claim before the IRP
or RP as the case maybe till the approval of a resolution plan by the committee of creditors so
constituted by the RP/IRP.

Other Relevant Information:

In accordance with section 15(1)(c) of the Code read with regulation 6(2)(c) of the
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016 (CIRP Regulations), once the application for initiation of the
CIRP is admitted by the National Company Law Tribunal (NCLT), a public announcement is
required to be released by the IRP for inviting claims. The public announcement is required
to provide for the last date (being 14 days) for submission of such claims from the date of the
appointment of the IRP. Further, regulations 7, 8, 9 and 9A of the CIRP Regulations provide
for the form and manner in which claims have to be submitted by various creditors.

In view of the above, a creditor may file its claim before the IRP or the resolution
professional (RP), as the case may be, even after the prescribed period, but until the approval
of a resolution plan by the committee of creditors (COC). Notably, under section 31(1) of the
Code, if the NCLT is satisfied that the resolution plan as approved by the COC meets the
requirements of the Code, it shall by order approve the resolution plan which shall be binding
on the corporate debtor and its employees, members, creditors, guarantors and other
stakeholders involved in the resolution plan. Therefore, it appears that once the resolution
plan is approved by the NCLT, it becomes binding on all the creditors, including a creditor
who may not have filed a claim in accordance with the provisions of the Code. The above
position seems to receive further support from section 238 of the Code, which states as
follows:

“The provisions of this Code shall have effect, notwithstanding anything inconsistent
therewith contained in any other law for the time being in force or any instrument having
effect by virtue of any such law.”

In view of the above, it is not clear if such creditors who have not filed a claim (inadvertently
or otherwise) during the CIRP will lose their legal right for their unpaid debt once the
resolution plan is finalized and approved by the NCLT due to non-obstante nature of the
Code. On another note, the language used in section 31(1) becomes critical, which states that:

“Section 31(1): If the Adjudicating Authority is satisfied that the resolution plan as approved
by the committee of creditors under sub-section (4) of section 30 meets the requirements as
referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which
shall be binding on the corporate debtor and its employees, members, creditors, guarantors
and other stakeholders involved in the resolution plan.”

Since section 31(1) seems to offer a hint that the resolution plan will be binding on
those who are involved in the resolution plan, hence an inference could be drawn that a
creditor who has failed to submit its claim (inadvertently or otherwise) during the permissible
period was not involved, and thus not bound by the resolution plan.

Further, in addition to filing an appeal before appellate authorities as per the

provisions of the Code (the grounds for appeal does not seem to suggest clearly if a case of
non-submission of claims is covered as a ground), a creditor may choose to resort to article
300A of the Constitution of India (since non-obstante nature of the Code cannot override the
constitutional provisions), which states as follows:

“No person shall be deprived of his property save by authority of law.”