Insolvency and Bankruptcy Code was passed in 2016. Claims are considered to be an integral part of the Insolvency and Bankruptcy Code. The main objective of implanting this code was to enable creditors to get their dues cleared on time through Corporate Insolvency and Resolution Process. To get a better insight into the topic let’s first discuss the meaning of the term ‘claim’.
Meaning of ‘Claim’:
According to section 3(6) of the Insolvency and Bankruptcy Code, ‘Claim’ can be defined as right to remedy or right to payment. Anything to fall under claim, right to remedy must lead to right to payment, if or not such right is reduced to judgement, matured, unmatured, secured, unsecured, fixed, disputed or undisputed.
What is CIRP:
CIRP takes care of necessary steps for revival of the company. Steps involved are looking for new buyers to sell the company as going concern and raise funds for the operation of business.
Parties that can claim:
Two parties that can claim under IBC are:
- Financial Creditors – The term has been defined in section 5(7) of IBC. It refers to those creditors which have lent any sort of funds in monetary terms or loan or any sort of credit facility. Some examples of financial creditors are Banks, Financial institutions etc.
- Operational Creditors- According to section 5(20) of code, operational creditors refer to those creditors to whom any sort of operational debt is owed or to whom any such debt is legally transferred. In simple terms it refers to those people who provide goods and service on credit and payment of the same is due in part of the corporate debtor.
- Further it includes any other creditors defined under code such as workmen, employees, home buyers etc.
All the above-mentioned stakeholders can mention their claim in the following manner-
Time period of submission of claims:
- In case of CIRP
In cases where there is no right to payment, the right to claim does not exist. Hence, we can say that the concept of claim is underlined by right to payment. It is due to Corporate Insolvency Resolution Process (CIRP) that concept of claim came into picture. As soon as the appointment is made the interim professional according to section – 15(1) makes a public announcement immediately within a period of 3 days. Now the public announcement consists of the following details like the register with which the entity has been registered, the last date of claim, the details of CD and other important details. The creditor is supposed to submit their claims within a time period of 14 days from the date of appointment of Interim Professional, the same has been mentioned in section-15 (1) (C) and also in regulation 6 (2) (C).
In case due to some reason a creditor fails to submit the claim within 14 days along with a proof can do so within a period of 90 days from the insolvency commencement day as per amendment in regulation 12(2). Before amendment the case was different, in case of failure it was provided that the creditor can submit the claim before approval of the resolution plan. To resolve various issues of stakeholders like insolvency, increase the availability of credit, protect the creditors etc. the Corporate Insolvency Resolution Process is a time bound process.
- In case of Liquidation.
Under these claims are required to be submitted within 30 days from the Liquidation commencement date as per section- 38 and regulation 12(1).
To whom claims are to be submitted:
- In case of CIRP
As per the understanding of regulation 12(1) of CIRP regulation all the claims are required to be submitted to interim resolution professionals or resolution professionals as the case may be. Further according to regulation 6 (2) (ab) of CIRP regulations claims are to be submitted to interim resolution professionals.
- In case of Liquidation.
Under these claims are to be submitted to regulators in pursuant to regulation 12 (2) of Liquidation Regulation claims.
Case Law:
The Principal Bench of the NCLT of latest Delhi within the case of M/s Edelweiss Asset Reconstruction company Private ltd Vs Adel Landmarks Ltd it had been held that the rejection of claim on the bottom of delay isn’t sustainable because the provisions has been held to be directory it had been held that each one insolvency Professionals shall make a note of those repeated Orders gone by NCLT clarifying that claim of an applicant just like the present one couldn’t be rejected on the bottom of delay because the provisions has been held to be directory
Forms for submitting the claims:
- In case of CIRP.
| TYPE OF CLAIMANT | CIRP | LIQUIDATION |
| Financial creditor | Form-C | Form- D |
| Operational Creditor | Form- B | Form- C |
| Workmen and Employee | Form- D | Form- E
If more no. – F |
| Creditor in class | Form- CA | —— |
| Another creditor | Form- F | Form- G |
Note-
- Form can be submitted in electronic mode to IRP by financial creditors and creditors in class.
- In case of operational creditors, workmen and employees form can be submitted either in person, by post or in electronic form to IRP.
- Any other creditor not listed above can make the submission of form to IRP through any mode i.e., by post, in person or electronic form.
- In case of liquidation.
| TYPES OF CLAIMANTS | LIQUIDATION REGULATIONS | FORM AS PER SCHEDULE II |
| Financial Creditors | Regulation 18 | Form D |
| Operational Creditors | Regulation 17 | Form C |
| Workmen and Employee | Regulation 19 | Form E |
| Authorised representative of workmen and employees | Regulation 19 | Form F |
| Other stakeholders | Regulation 20 | Form G |
Note-
1. Form can be submitted in electronic mode to IRP by financial creditors and creditors in class.
2. In case of operational creditors, workmen and employees form can be submitted either in person, by post or in electronic form to IRP.
3. Any other creditor not listed above can make the submission of form to IRP through any mode i.e., by post, in person or electronic form.
Timeline for verification of claims:
- In case of CIRP
According to regulation 13(1) of Corporate Insolvency Resolution Process Regulation the claim shall be verified within seven days from the last date of receipt of claim by an interim resolution professional.
- In case of Liquidation
Liquidators shall verify the claim within 30 days from the last date of receipt of claim as per the regulation 29(1) of Liquidation regulations.
Will the limitation period apply in IBC?
Initially it was held that limitation period will be applicable to transactions that took place after amendment. But later the Supreme Court cleared that it will be applicable to old cases as well. The same has been mentioned in section 238(A) of IBC.
Conclusion
It is very important to take in consideration timely changes necessary. However, it is advised that one should not submit wrong or inflated claims to Insolvency Resolution Professionals. The cost of verification and cost of determination will be recovered from the applicant in case a wrong claim is filed.
This article has been authored by Eshika Singla of Amity University, Noida.
