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NTPC LTD. (Simhadri Project) v. Rajiv Chakraborty

Civil Appeal · 2020 INSC 642Decided 16 Nov 2020
Civil Appeal No. 2798 of 2020
Justice A.M. Khanwilkar · Justice B.R. Gavai · Justice Hrishikesh Roy

Background

NTPC, an operational creditor in the insolvency resolution process of a company, objected that its claim had not been properly reflected under the heading "Claims of Operational Creditors" in the Information Memorandum prepared by the Resolution Professional. Instead, the claim was listed under a separate heading of "other creditor claims (claims under adjudication)," since the claim amount itself was still pending adjudication before an arbitrator. NTPC filed a civil appeal (with an application for clarification/direction) seeking correction of this classification.

Decision Breakdown

The Supreme Court held that the Resolution Professional had correctly and fairly noted NTPC's claim in the Information Memorandum, just under a different heading reflecting that the claim's quantum was disputed and pending arbitration. It explained that an Information Memorandum's purpose is only to give an accurate picture of the company's financial position for prospective resolution applicants: it does not adjudicate claims, and a Resolution Professional has no power to accept or reject them. The Court clarified that NTPC's claim was not extinguished by this classification, would be taken into account by the Committee of Creditors and resolution applicants in formulating a resolution plan, and that NTPC could raise objections at the stage of the final resolution plan if it remained aggrieved. The civil appeal was disposed of on this basis, and the interim order passed earlier in the matter was vacated.

Lesson Learnt

During a company's insolvency resolution, having a disputed or not-yet-adjudicated claim recorded under a different heading in the Information Memorandum does not mean the claim is lost: creditors retain the right to pursue adjudication of the claim separately and to object to the final resolution plan if their interests are not properly accounted for.

Official source (sci.gov.in)View Judgment (PDF)

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