Introduction

The case of Puneet Kaur v. K.V. Developers Private Limited And Others adjudicated by the National Company Law Appellate Tribunal (NCLAT) on June 1, 2022, addresses a critical issue in the realm of insolvency resolution under the Insolvency and Bankruptcy Code, 2016 (IBC). The dispute arose when homebuyers, acting as financial creditors, challenged the refusal of the Adjudicating Authority to entertain their late claims against K.V. Developers Private Limited, a real estate company undergoing Corporate Insolvency Resolution Process (CIRP).

The appellants, who were homebuyers, submitted their claims post the prescribed deadline, leading to their exclusion from the initial list of creditors approved by the Committee of Creditors (CoC). The central issue revolved around whether these belated claims should be admitted, given that their details were recorded in the corporate debtor's records but were not included in the Information Memorandum prepared by the Resolution Professional.

Summary of the Judgment

The NCLAT consolidated five appeals filed by homebuyers of K.V. Developers Private Limited, all challenging the rejection of their claims due to lateness. The Resolution Professional had published Form-A inviting claims by November 11, 2020. However, the appellants filed their claims between July and November 2021, exceeding the eight-month timeframe set by the Resolution Professional.

The Adjudicating Authority upheld the Resolution Professional's decision, citing the procedural deadlines and the approved Resolution Plan by the CoC. The appellants contended that they were unaware of the CIRP initiation and, therefore, could not file timely claims. They also argued that their claims were documented in the corporate debtor's records and deserved inclusion in the Information Memorandum.

Upon review, the NCLAT held that while the Resolution Professional acted within procedural confines by adhering to the Form-A deadlines, there was merit in the appellants' argument regarding the omission of their claims from the Information Memorandum. Recognizing the protective aim of IBC to safeguard creditor interests, especially those of homebuyers, the Tribunal directed the Resolution Professional to collate and include these unfiled claims in an addendum to the Resolution Plan. This directive ensures that the Resolution Plan comprehensively reflects all liabilities, promoting fairness and equity among all creditors.

Analysis

Precedents Cited

The Tribunal referenced several key precedents to underpin its decision:

• Mukul Kumar v. RPS Infrastructure: Emphasized that once a Resolution Plan is approved by the CoC and pending tribunal approval, new claims should not disrupt the resolution process, aligning with the objectives of time-bound resolution under IBC.
• Harish Polymer Product v. George Samuel RP for Jason Dekor Pvt. Ltd.: Highlighted the unfair treatment of financial creditors when a significant number of homebuyers' claims are excluded, advocating for their inclusion to ensure equitable resolution.
• Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd.: Clarified that once a Resolution Plan is approved, only the claims included within it are binding, and all others are extinguished, reinforcing the need for comprehensive inclusion in the plan.
• Santosh Wasantrao Salokar v. Vijay Kumar V. Iyer: Addressed the necessity of including micro-claims in the Information Memorandum to prevent injustice to small creditors like individual homebuyers.

These precedents collectively emphasize the balance between procedural adherence and equitable treatment of creditors, especially those who may face genuine difficulties in timely claim submission.

Legal Reasoning

The Tribunal's legal reasoning hinged on the principles of fairness, transparency, and the fundamental objectives of the IBC to maximize the value of the corporate debtor and protect creditor interests. Key points include:

• Inclusion of All Liabilities: Regulation 36(2)(a) of the CIRP Regulations mandates the Resolution Professional to include all liabilities of the corporate debtor in the Information Memorandum. This includes obligations to homebuyers who may not have filed claims timely.
• Documented Obligations: The Tribunal observed that the homebuyers’ claims were documented in the corporate debtor's records, indicating a legal obligation that should not be disregarded merely due to procedural lapses in claim submission.
• Equitable Treatment: Recognizing that numerous homebuyers might face genuine barriers in filing claims timely, the Tribunal emphasized the need for the Resolution Plan to reflect these liabilities to prevent unjust enrichment or disproportionate disadvantage to certain creditors.
• Preventing CIRP Disruption: While adhering to procedural deadlines is important to ensure efficiency, the Tribunal balanced this with the necessity of a fair resolution process that comprehensively addresses all creditor claims.

Thus, the Tribunal directed that the Resolution Professional should gather and present the unfiled claims, and the Committee of Creditors should incorporate them into the Resolution Plan, ensuring that the resolution process remains just and comprehensive.

Impact

The judgment has significant implications for future insolvency resolutions, particularly in the real estate sector:

• Enhanced Creditor Protection: Homebuyers and similar micro-creditors are afforded greater protection, ensuring their claims are considered even if they face challenges in timely filing.
• Comprehensive Information Memorandum: Resolution Professionals are now compelled to meticulously review corporate records to identify and include all potential creditor claims, promoting transparency.
• Guidance for Future CIRPs: The judgment provides a clear directive on handling unfiled claims, serving as a guiding principle for Resolution Professionals and Tribunals to balance procedural efficiency with equitable treatment.
• Encouragement for Timely Claims: While ensuring inclusion, the judgment does not negate the importance of adhering to procedural timelines, thereby encouraging creditors to file promptly while providing a safety net for legitimate cases of delay.

Overall, this judgment strengthens the framework of insolvency resolution by ensuring that the interests of all creditors, especially vulnerable ones, are adequately safeguarded.

Complex Concepts Simplified

Conclusion

The NCLAT's judgment in Puneet Kaur v. K.V. Developers Private Limited And Others marks a significant advancement in the implementation of the Insolvency and Bankruptcy Code, especially concerning the equitable treatment of homebuyers in CIRP of real estate companies. By mandating the inclusion of unfiled but documented claims in the Resolution Plan, the Tribunal reinforced the importance of comprehensive creditor representation, ensuring that all stakeholders' interests are duly considered.

This decision not only provides relief to the affected homebuyers but also sets a robust precedent for future insolvency proceedings, promoting fairness, transparency, and thoroughness in the resolution process. As insolvency laws continue to evolve, such judgments play a crucial role in refining the balance between procedural adherence and substantive justice, ultimately contributing to a more resilient and equitable financial ecosystem.