IBC Section 38: Consolidation of claims

Section 38 of Insolvency and Bankruptcy Code, 2016: Consolidation of claims

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(1) The liquidator shall receive or collect the claims of creditors within a period of thirty days from the date of the commencement of the liquidation process.

(2) A financial creditor may submit a claim to the liquidator by providing a record of such claim with an information utility:

Provided that where the information relating to the claim is not recorded in the information utility, the financial creditor may submit the claim in the same manner as provided for the submission of claims for the operational creditor under sub-section (3).

(3) An operational creditor may submit a claim to the liquidator in such form and in such manner and along with such supporting documents required to prove the claim as may be specified by the Board.

(4) A creditor who is partly a financial creditor and partly an operational creditor shall submit claims to the liquidator to the extent of his financial debt in the manner as provided in sub-section (2) and to the extent of his operational debt under sub-section (3).

(5) A creditor may withdraw or vary his claim under this section within fourteen days of its submission.

Legal Commentary & Landmark Judgments: Section 38

Section 38 prescribes the statutory procedure and 30-day timeline for creditors to submit claims to the liquidator, and establishes the methods for proving financial and operational claims.

30-Day Submission Standard: The liquidator shall receive or collect the claims of creditors within a period of thirty days from the date of the commencement of the liquidation process.
Financial Creditor Claims: A financial creditor may submit a claim by providing records of Information Utility or other financial records.
Operational Creditor Claims: Operational creditors submit claims with invoices, delivery proofs, and contracts.
Secured Creditor Indication (Section 38(3)): Secured creditors must indicate whether they intend to realize their security interest outside the liquidation process or relinquish security to the estate under Section 52.

Key Landmark Precedents:

State Tax Officer v. Rainbow Papers Ltd. (2023) 9 SCC 545: The Supreme Court analyzed the submission of claims by statutory tax authorities, holding that claims must be verified in accordance with statutory rules.
Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd. (2023) 10 SCC 60: The Supreme Court held that secured creditors submitting claims under Section 38 must unequivocally declare whether they relinquish their security interest under Section 52.

Courtroom Practice & Strategic Litigation Guidance:

Secured creditors submitting claims under Section 38 must explicitly declare in Form C whether they relinquish their security interest to the liquidation estate. Once relinquished, they rank high under Section 53(1)(b)(ii); if retained, they realize security under Section 52.