Liquidator Rejected Your Claim or Admitted a Lower Amount? Know Your Legal Remedies
When a company enters liquidation, creditors expect the liquidator to review their claims and pay them according to the law. However, some creditors face a different problem: the liquidator rejects their claim or accepts a lower amount than they expected. If a Liquidator rejected your claim, know your legal remedies and what steps you can take next.
For example, a supplier may claim unpaid invoices worth ₹10 lakh, but the liquidator may accept only ₹6 lakh. Similarly, a lender may find that the liquidator has rejected the claim due to missing records or a dispute over the debt.
If the liquidator rejects your claim or accepts less than you are owed, you may have legal options under the Insolvency and Bankruptcy Code, 2016 (IBC). Therefore, you should review the decision promptly and act within the time limit set by law.
1. Why Might a Liquidator Reject Your Claim?
A liquidator checks the documents and records that support each creditor’s claim. However, the liquidator may reject a claim or reduce its value for several reasons.
Common reasons include:
- Missing documents: You have not provided invoices, contracts, loan papers, or account statements.
- Amount mismatch: Your claim does not match the company’s books or other records.
- Payment disputes: The company disputes the debt or says it has already paid part of the amount.
- Weak proof: You cannot provide enough evidence to support the amount you claimed.
- Wrong claim category: The liquidator believes your claim falls under a different category.
- Late submission: You filed your claim after the relevant deadline, and the liquidator must consider the rules that apply to late claims.
However, a rejection or reduction does not always mean that your claim lacks merit. The liquidator may have overlooked a document, misunderstood a transaction, or applied the wrong legal test. Therefore, review the reasons for the decision before deciding what to do next.
2. What Does Section 42 of the IBC Say?
Section 42 of the IBC gives a creditor the right to appeal to the National Company Law Tribunal (NCLT) if the liquidator rejects the creditor’s claim.
The law sets a strict deadline. A creditor must file the appeal within 14 days after receiving the liquidator’s decision. The NCLT may allow up to a further 14 days if the creditor shows sufficient cause for the delay. However, the law does not permit an appeal beyond that additional period.
As a result, creditors should not wait until the liquidation process moves much further ahead. Instead, they should obtain the rejection letter or claim decision, collect the supporting records, and seek legal advice at once.
Section 42 provides a specific route for challenging the liquidator’s decision. Nevertheless, the correct steps depend on the facts, the reasons for rejection, and the available evidence.
3. What If the Liquidator Accepts a Lower Amount?
Sometimes, the liquidator accepts part of a claim but refuses the rest. For instance, a supplier may claim ₹15 lakh, while the liquidator accepts only ₹9 lakh.
In this situation, first compare the amount claimed with the amount accepted. Then, check the liquidator’s reasons for the difference.
Your review should cover:
- Invoices and bills: Do they support the full amount you claimed?
- Contracts and purchase orders: Do they confirm the agreed price and payment terms?
- Account statements: Do they show the unpaid balance clearly?
- Payment records: Have you accounted for every payment, credit note, or adjustment?
- Written communications: Do emails or letters confirm that the company owes the disputed amount?
Next, prepare a clear summary that explains the difference between your claim and the amount the liquidator accepted. This will help your lawyer assess whether the records support a challenge under Section 42.
4. What Documents Should You Prepare?
Strong documents can help you explain why the liquidator should accept your claim in full. Therefore, gather the following records before seeking legal help:
- A copy of the proof of claim you submitted.
- The liquidator’s rejection letter or decision on the claim.
- Contracts, purchase orders, invoices, and delivery records.
- Loan agreements, account statements, and payment records, where relevant.
- Emails, letters, and other communications with the company.
- Any documents that show the company’s admission of the debt.
- A calculation of the amount claimed and the amount the liquidator accepted.
In addition, keep proof of the date on which you received the liquidator’s decision. That date can affect the deadline for your Section 42 appeal.
5. How Can a Lawyer Help You Challenge the Decision?
A lawyer can examine the liquidator’s reasons, compare them with your documents, and identify gaps or errors in the decision. If the facts support a challenge, your lawyer can advise you on filing an appeal before the NCLT under Section 42.
Legal help may include:
- Reviewing the claim and the liquidator’s decision.
- Checking the amount of debt and the evidence that supports it.
- Identifying the correct legal route and filing deadline.
- Preparing the appeal and supporting documents.
- Presenting the legal grounds for accepting the rejected or disputed amount.
However, every case depends on its own facts. A creditor should not assume that the NCLT will automatically allow the full claim. The creditor must support the case with evidence and follow the legal process.
6. Why Should You Act Quickly?
Liquidation follows a legal process, and delays can affect your options. For example, if the liquidator rejects your claim, missing the appeal deadline may create a serious obstacle to challenging that decision.
Therefore, act as soon as you receive a rejection letter or discover a major difference between the amount claimed and the amount accepted. Early legal review can help you understand your options and prepare the right documents in time.
How Lex Pleaders & Co. Can Help
Lex Pleaders & Co. assists creditors who face problems with rejected claims, reduced claim amounts, and other disputes during company liquidation. Our team can review your records, assess the liquidator’s decision, and advise you on possible remedies under the IBC.
Has the liquidator rejected your claim or accepted less than the amount you are owed? Contact Lex Pleaders & Co. for a legal review of your claim and guidance on the next steps.
Disclaimer: This article provides general legal information and does not replace advice on a specific case. The outcome depends on the facts, the available evidence, and the law that applies. Creditors should verify current legal requirements and deadlines before taking action.