Supreme Court Upholds Strict Timelines for Claims in Insolvency Cases, Cautions Against Reopening Undecided Claims
In a significant ruling, the Supreme Court of India, in a judgment delivered on September 11, 2023, upheld the strict timelines for the inclusion of claims in Corporate Insolvency Resolution Process (CIRP) cases, cautioning against reopening claims after the approval of resolution plans. The judgment, authored by Justice Sanjay Kishan Kaul, carried far-reaching implications for insolvency proceedings, emphasizing the importance of adherence to established procedures.
The case, M/s. RPS Infrastructure Ltd. Vs. Mukul Kumar & Anr., revolved around the inclusion of a belated claim in the CIRP of a Corporate Debtor. The appellant sought to include a claim related to an arbitral award, which was in appeal under Section 37 of the Arbitration Act. The Corporate Debtor had initiated the CIRP process for several real estate projects, and a resolution plan had already been approved by the Committee of Creditors (COC).
In a key observation, the Supreme Court highlighted the significance of timeliness in the insolvency process, stating, “The IBC is a time-bound process… Allowing claims after the resolution plan has been accepted by the COC would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon.”
The Court emphasized that the Corporate Debtor had followed due procedures, including making public announcements regarding the CIRP through newspapers, which constituted deemed knowledge for all concerned parties. The appellant’s plea of not being aware of these announcements was deemed untenable in a commercial context.
The judgment also referred to earlier decisions, including the Committee of Creditors of Essar Steel India Limited case, where the Court had cautioned against entertaining claims after the acceptance of a resolution plan.
Supreme Court dismissed the appeal, leaving the parties to bear their own costs. The judgment reiterates the significance of timely adherence to insolvency procedures and the potential consequences of reopening unresolved claims, providing valuable guidance for future insolvency cases.
Date of Decision: September 11, 2023
M/s. RPS INFRASTRUCTURE LTD. vs MUKUL KUMAR & ANR.
