Rejection Of Belated And Contingent Claims By Resolution Professional Cannot Be Faulted: NCLAT

The NCLAT New Delhi Bench of Justice Ashok Bhushan (Judicial Member), and Mr. Barun Mitra (Technical Member) has held that when the claims have been filed belatedly after 548 days and that too the claims arise from damages and breach of contract which according to the Appellant is admittedly contingent, the RP's action to reject the claim by way of a reasoned reply to the Appellant cannot be put to fault. Brief Facts: The appellant entered into an agreement with the corporate debtor under which the CD undertook to erect four street lights. However, the projects could not be completed on time. The appellant issued a notice for non performance. Thereafter, a legal notice was also sent demanding refund of advances paid along with interest. Meanwhile, the corporate debtor was admitted into insolvency on an application moved by an operational creditor under section 9 of the code. The RP issued a demand notice under section 8 claiming amount for invoices raised by the CD which was not answered by the appellant which led to filing an application under section 9. Thereafter, the appellant filed claims in the CIRP of the CD which came to be rejected by the RP. This decision of the RP has been challenged in the present appeal. Contentions: The appellant submitted that the RP failed in its duty to properly assess the claims submitted by the appellant. The claims were rejected within 3 days which demonstrates a lack of application of mind. It was further contended that the RP exceeded his authority by rejecting the claims as the RP does not exercise adjudicatory powers under the code. It merely exercises administrative powers as elucidated by the Supreme Court in Swiss Ribbons. In Export Import Bankof India Vs. Resolution Professional JEKPL Pvt. Ltd. the NCLAT held that as per Section 18(1) of IBC, it is the duty of the Resolution Professional to collate all the claims and to verify the same from the records of assets and liabilities maintained by the CD. It was further argued that Regulation 12 of CIRP Regulations which deals with submission of claim and the time period specified therein is directory and not mandatory and that the CIRP Regulations do not put any embargo on the verification of claims seven days prior to the meeting of the CoC for voting on the resolution plan. It was contended that the submission of claim could not have dismissed by the RP by holding them to be belated and time-barred. Refuting the submissions, the respondent argued that the decision taken by the RP not to admit the claim was neither unusual nor hasty since the IBC provides a tight time-limit of 7 days within which the RP is required to verify the claim from the date of its receipt. It was also contended that these claims had been raised by the Appellant in respect of damages arising out of non- performance of contract which claims could not be verified within the limited jurisdiction of the RP as conferred by the IBC and that the claim of the Appellant was a counter- poise to the Section 9 proceeding initiated by the RP against the Appellant. Lastly, it was submitted that allowing claims at such an advanced stage when the plan is ripe to be approved by the CoC would jeopardise the plan and disrupt the CIRP process. Observations: The tribunal at the outset noted that it is well settled that that the RP as a facilitator of the insolvency resolution process, it is incumbent upon him to assist in the CIRP process in a fair and objective manner. It also noted that the Interim Resolution Professional had undisputedly made a Public Announcement on 17.12.2021 incompliance with Sections 13 and 15 of the IBC read with Regulation 6 of CIRP Regulations. The Public Announcement had set 27.12.2021 as the deadline for claim submissions. The Appellant never filed their claim within the time stipulated by the Public Announcement or within the extended timeline of 90 days as provided by the Regulation 12 of CIRP Regulations. The Appellant had filed their claim on 12.09.2023 which was much beyond the extended period of 90 days. Having noted the delays on the part of the appellant, the tribunal observed that “despite having filed their claim belatedly, the Appellant has put the blame on the RP for having dealt with the claims and rejected the same within 3 days. We are not impressed by this plea of the Appellant. IBC is a time bound process and the RP cannot be blamed for dealing with the claim within three days as the prescribed outer time-period to decide on the claims is only seven days.” After going through the relevant documents, the tribunal said that these claims are in respect of damages arising out of non-performance of contract which claims could not have been adjudicated upon by the RP at his level given the limited jurisdiction conferred on the RP by the IBC. It further opined that “needless to add, the RP is not expected to process...

Rejection Of Belated And Contingent Claims By Resolution Professional Cannot Be Faulted: NCLAT

Mohd Malik Chauhan

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