Tribunal finds zero valuation improper, orders notional positive value assignment for pending arbitration claim.
In a significant ruling, the National Company Law Tribunal (NCLT) Kochi Bench has directed the Liquidator of M/s. Saptha Zeal Pvt. Ltd. to reassess and assign a positive notional value to a claim initially valued at zero due to its contingent nature. The judgment, delivered by Shri. Vinay Goel and Smt. Madhu Sinha, addresses an appeal filed by M/s. HLL Infra Tech Services Ltd. (HITES) against the Liquidator's decision to assign zero value to their claim, which is currently pending arbitration.
The appeal arose from a dispute over a contract awarded to the Corporate Debtor, M/s. Saptha Zeal Pvt. Ltd., for operations and maintenance services at the Government Medical College, Thiruvananthapuram. Arbitration proceedings were initiated following contractual disagreements, leading HITES to file counter-claims amounting to over Rs. 6 crore. Despite the admission of these claims during the Corporate Insolvency Resolution Process (CIRP), the Liquidator admitted them at zero value during the liquidation process, citing the contingent nature pending arbitration.
The Tribunal found this approach improper, emphasizing the Liquidator's obligation to independently verify and assess all claims, including those previously admitted during CIRP. The judgment highlights the Liquidator's higher statutory powers compared to the Resolution Professional during CIRP, necessitating a comprehensive review of claims based on their genuineness, accuracy, and legality.
The NCLT underscored that assigning zero value to the claim was unjust, directing the Liquidator to employ standard accounting protocols to determine a positive notional value. This reassessment is crucial for the equitable distribution and consideration of claims during liquidation.
Additionally, the Tribunal addressed concerns regarding the Liquidator's fees, noting that this issue falls outside the appeal's scope. The ruling clarifies that while the fee determination should ideally occur in the first Stakeholders' Consultation Committee meeting, no illegality was found in the subsequent decision-making process.
The Tribunal's decision mandates the Liquidator to reassess the claim's value within seven days, reaffirming the importance of fair and transparent liquidation proceedings. This judgment sets a precedent for handling contingent claims in liquidation processes, ensuring claimants receive due consideration and equity.
Bottom Line:
Insolvency and Bankruptcy Code (IBC) - Liquidator's decision to assign "zero" value to a claim challenged - Tribunal directs reassessment and assignment of a positive notional value to the claim.
Statutory provisions: Sections 33, 39, 40, 42 of the Insolvency and Bankruptcy Code, 2016; Regulation 4, 12, 29, 30 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
