S. Gopi, Proprietor, Goutham roadways Vs. M/s Empee Distilleries Ltd.: Claim can not be paid from the Contingency Fund after approval of the Resolution Plan

In S. Gopi, Proprietor, Goutham roadways Vs. M/s Empee Distilleries Ltd. , the claim of the Applicant was rejected by Resolution Professional on the basis of documentary evidence. The Adjudicating Authority denied granting relief to make payment of the Applicant’s Claim from the Contingency Fund.

The NCLAT, Chennai held that “Contingency Fund means a provision created in a Resolution Plan to avoid inevitable losses of creditors. It is made to include Liabilities arising which are uncertain and inevitable in nature or pending under verification. Maintaining a Claim does not necessitate or carry any nexus between the commission of a Default and the submission of a Claim. A Creditor can exercise his right to payment or to remedy for the matured, unmatured, secured, unsecured, Disputed or Undisputed Debts. In Code, 2016 to recover Debt from the Corporate Debtor, it is necessary for a Claimant to be a Creditor. While definite, identified or ascertained Claims can be easily accounted for, the problem lies when Claims which are either inevitable or contingent ones.”

The Contingency Fund was maintained for a period of 6 months from the Date of Approval of the Resolution Plan. It is further observed that during the Implementation Process, under the Monitoring Committee, the Appellant had approached the 1st Respondent. However, the Appellant could not substantiate his Claims, by furnishing necessary supporting documents in respect of the Claims, so made.

NCLAT notices that:-

• The Resolution Plan as approved by the Adjudicating Authority was successfully implemented;
• The Successful Resolution Applicant had taken over the management;
• The Monitoring Committee had ceased to Exist.

Further, it held that the Contingency Fund is for the specific purpose of to cater for Claims which were not Determined and settled finally, at the time of the Resolution Plan. There is a stipulated time frame as provided in the Resolution Plan and the Fund after meeting the requirements of the Claims, ceased to exist. By no stretch of the imagination, it can be inferred that any Claim can be entertained after the Resolution Plan, was fully implemented and the new management of the Successful Resolution Applicant had taken over.

NCLAT upholds the decision of the Adjudicating Authority to be a correct and proper one, on this issue.