NCLT Chennai Directs Re-Verification of SBI Claim In Apollo Polyvinyl Insolvency

The National Company Law Tribunal (NCLT) at Chennai has recently held that a resolution professional cannot mechanically admit a lender's claim during insolvency proceedings when it distorts voting power in the committee of creditors.

The tribunal ordered a fresh verification of the claim admitted in favour of the State Bank of India in the insolvency of Apollo Polyvinyl Private Limited.

A coram of Judicial Member Jyoti Kumar Tripathi and Technical Member Ravichandran Ramasamy said higher diligence was required in such cases. This was especially so where the claim of a consortium member exceeded that of the lead bank.

“Admission of the claim without independent verification cannot be sustained as a proper discharge of duty under Regulations 12 to 14 of the CIRP Regulations,” the tribunal said.

Apollo Polyvinyl had borrowed from a consortium of banks. Canara Bank was the lead lender. SBI was part of the consortium. After insolvency proceedings began, Canara Bank filed a claim of Rs 45.13 crore.

SBI filed a claim of Rs 62.21 crore. The resolution professional slightly reduced Canara Bank's claim. SBI's claim was admitted in full. Canara Bank objected. It said SBI's exposure was lower, and the higher admitted amount would skew voting shares in the committee of creditors.

Canara Bank argued that the resolution professional relied mainly on SARFAESI demand notices and SBI's own calculations. It said key documents were not examined. These included sanction letters, consortium agreements, and authenticated account statements. Canara Bank also alleged that SBI had charged penal interest beyond agreed terms.

The resolution professional declined to share documents sought by Canara Bank, citing confidentiality. SBI defended its claim. It said the amounts were based on contractual terms and that higher penal interest was permitted under its sanction letters.

The tribunal rejected the argument that the issue was only between two banks. It said claim verification during insolvency is a statutory duty of the resolution professional.

“The contention that the dispute is purely inter se between financial creditors cannot be accepted. Once a claim is filed in CIRP, its verification and admission is a statutory function of the Resolution Professional. Any procedural lapse or mechanical admission that materially alters CoC voting share falls squarely within the supervisory jurisdiction of this Tribunal under Section 60(5),” it said.

The coram found that SBI's claim was admitted without proper verification and without addressing Canara Bank's objections. It directed the resolution professional to re-examine the claim and revise voting shares or distribution, if necessary.

For Applicant: Advocates Vinithra Srinivasan and Varun Srinivasan

For Respondents: Advocates Pranav Charan, M. L. Ganesh and Sashikumar