NCLAT Delhi: Examining The Validity Of Any Contractual Agreement Is Beyond The Scope Of Powers Of RP

Background Facts:

On 01.06.2016, Indirapuram Habitat Centre Pvt. Ltd. (Corporate Debtor) entered into a Consultancy Agreement ('Agreement') with Mr. Umesh Kumar (Appellant) for media management consultancy on a monthly retainership of Rs.10 lakhs per month.

Post admission of the Corporate Debtor into the Corporate Insolvency Resolution Process ('CIRP'), the Appellant filed claims before the RP which were acknowledged on the same date. However, neither any confirmation nor any query was raised by the RP concerning the Appellant's claim and it was only on the Appellant's letter, that the claim was rejected.

The Appellant filed an appeal against NCLT Delhi's Order dated 21.11.2023 wherein the Tribunal rejected his application seeking acceptance of his claims which had been rejected by the RP.

Contentions of the Appellant:

The Appellant contended that the RP failed to take into account crucial documents like bank statements and GST statements, demonstrating the existence of the Agreement between the Appellant and the Corporate Debtor. He emphasized that he had consistently provided satisfactory services to the Corporate Debtor without any objections.

He argued that the RP's insistence on proof of services was unjustified since Section 18 of the IBC outlines the duties of the RP to adjudicate claims without granting any such authority to call for proof of services. The Appellant further contended that the RP's rejection of their claim, despite the absence of any dispute regarding the Agreement, was inconsistent with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('CIRP Regulations').

NCLAT Verdict:

The NCLAT Delhi affirmed NCLT's Delhi Order and held that examining the validity/sustainability of any contractual agreement including its formatting etc lies outside the purview of the charter of duties and responsibilities of the RP.

The Appellate Tribunal noted that such assessment of of the tenability/validity of a contractual agreement falls in the realm of a civil dispute and therefore is beyond the scope and jurisdiction of both the NCLT and NCLAT. However, the same does not prevent the RP from requesting additional information from creditors to support their claims.

It observed that the IBC framework assigns the RP a pivotal role as a facilitator of the CIRP process, requiring them to exercise reasonable care and diligence. Therefore, the RP must conduct thorough verification and analysis of filed claims, ensuring fairness and objectivity for all stakeholders. As an officer of the court with administrative powers, the RP is expected to carry out the CIRP process with fairness, diligence, and a strong sense of responsibility.

NCLAT in conclusion noted that NCLT Delhi was incorrect in terming the Agreement as nebulous and unclear post relying upon the observations made by the RP.

Case Title: Mr. Umesh Kumar vs. Mr. Narendra Kumar Sharma, IRP of Indirapuram Habitat Centre Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 100 of 2024

Counsel for Appellant: Ms. Nattasha Garg, Mr. Thakur Ankit Singh, Mr. Srikant Singh, Ms. Shristy Singh, Advocates.

Counsel for Respondent: Mr. Sumesh Dhawan, Mr. Praful Jindal, Mr. Shaurya

Shyam, Advocates along with Mr. N.K. Sharma, RP.

Click here to Read/Download Order