Introduction
In a significant judgment, the Supreme Court of India in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni & Anr. (Civil Appeal Nos. 7590–7591 of 2023) ruled in February 2024 that a valid claim under the IBC cannot be rejected merely for being filed in an incorrect format. The Court emphasized that substance must prevail over form, reinforcing the protection of creditor rights under the Insolvency and Bankruptcy Code, 2016 (IBC).
Background of the Case
- Greater Noida Industrial Development Authority (GNIDA) leased land to JNC Construction (P) Ltd., which later defaulted on payments.
- During the Corporate Insolvency Resolution Process (CIRP), GNIDA submitted a claim of ₹43.40 crore as a financial creditor, supported by documentation.
- The Resolution Professional (RP) classified GNIDA as an operational creditor and requested resubmission in Form B instead of Form C.
- GNIDA did not resubmit, and its claim was excluded from the approved resolution plan.
- The NCLT and later the NCLAT dismissed GNIDA’s objections, prompting an appeal to the Supreme Court.
Legal Issues Framed
- Can a claim be rejected solely because it was filed in the wrong form?
- Did the RP err in categorizing GNIDA as an operational creditor?
- Was the resolution plan compliant with Section 30(2) of the IBC?
- Did the NCLT and NCLAT err in rejecting GNIDA’s objections without proper consideration?
Contentions of the Parties
GNIDA’s Submissions
- Statutory Charge: Claimed the status of a secured financial creditor due to a statutory charge over the leased land under Section 13-A of the U.P. Industrial Area Development Act, 1976.
- Violation of Natural Justice: GNIDA was not allowed to participate in CoC meetings despite having dues over 10% of the total debt.
- Substantive Validity of Claim: The RP wrongly disregarded a legally valid claim due to a technical defect in the form.
- Plan Feasibility Issue: The resolution plan relied on land leased from GNIDA without addressing lease conditions or dues, rendering it unviable.
Respondents’ Submissions
- The RP relied on New Okhla Industrial Development Authority v. Anand Sonbhadra (2023) to treat GNIDA as an operational creditor.
- GNIDA’s failure to resubmit the claim in the correct form made it invalid for consideration.
- The resolution plan was approved by the CoC, and the court should not interfere with their commercial wisdom.
Supreme Court’s Analysis and Findings
1. Forms Are Directory, Not Mandatory
The Court held that Forms B and C under the CIRP Regulations are not mandatory. What matters is the existence of a claim supported by proof.
- Cited Ghanashyam Mishra & Sons v. Edelweiss ARC (2021) to stress that procedural lapses cannot override substantive rights.
- The RP must verify the claim on merits, not dismiss it on technical grounds.
2. GNIDA is a Secured Creditor
- Under Section 13-A of the U.P. Industrial Area Development Act, GNIDA had a statutory first charge, qualifying it as a secured creditor under Section 3(30) of the IBC.
- The plan’s failure to recognize this status violated Regulation 37 of the CIRP Regulations.
3. Violation of Natural Justice
- GNIDA was not served notice of CoC meetings, despite having dues over the 10% threshold under Section 24(3)(c) of the IBC.
- The Court reaffirmed principles from Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC (India) Ltd. (2022), stressing fairness and transparency in CIRP.
4. Resolution Plan Was Deficient
- The plan’s feasibility was questionable, as it used GNIDA-leased land without resolving legal issues.
- Referred to Manohar Lal Chopra v. Rai Bahadur Rao Seth Hiralal (1962) to hold that procedural errors undermining justice warrant intervention.
- The Court found non-compliance with Section 30(2), which mandates that the plan must meet all legal requirements and feasibility tests.
Final Judgment and Directions
The Supreme Court set aside the orders of the NCLT and NCLAT and remanded the resolution plan to the CoC for reconsideration, directing that:
- GNIDA’s claim must be evaluated on merits, regardless of form submission defects.
- GNIDA must be treated as a secured creditor under the IBC.
- The resolution plan must be reassessed for feasibility in light of GNIDA’s rights and charge over the land.
Conclusion and Key Takeaways
This judgment marks a critical reaffirmation that procedural technicalities cannot defeat substantive claims in insolvency proceedings. The Court emphasized:
- Substance over form: Valid claims backed by proof must not be ignored due to format errors.
- Protection of secured creditors: Statutory charge-holders must be properly classified and included in resolution proceedings.
- Transparency in CIRP: Creditors with substantial dues must be given a seat at the table.
The ruling strengthens creditor protection and ensures that insolvency resolution remains just and equitable, especially where public or statutory bodies are involved.
FAQs:
1. Can a valid claim be rejected for being filed in the wrong form?
No. The Supreme Court has clarified that form is not mandatory—a claim must be considered if it is supported by sufficient proof.
2. Is GNIDA considered a secured or operational creditor?
GNIDA is a secured creditor, owing to a statutory charge over the land under applicable state law.
3. What does this ruling mean for other statutory authorities?
The decision sets a precedent for statutory bodies to be recognized as secured creditors, even if procedural steps are not perfectly followed.
4. Can the CoC exclude a creditor who filed incorrectly?
No. The CoC and RP must consider all substantiated claims, regardless of filing format, unless expressly excluded by law.
5. What happens to a resolution plan that ignores valid secured claims?
Such a plan is legally deficient and may be set aside or remanded, as seen in this case.
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