Resolution Professional Cannot Act as Adjudicator and is Right to Reject Belated, Unadjudicated Claims During Advanced CIRP Stage

NCLAT held that the Resolution Professional cannot act as an adjudicator and was right in rejecting the belated, unadjudicated claims filed at an advanced stage of the CIRP.

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), observed that a Resolution Professional, having no adjudicatory powers under the IBC, cannot admit belated and unadjudicated claims involving contractual disputes and speculative damages, particularly when such claims are filed after an inordinate delay and at an advanced stage of the CIRP; the rejection is not based solely on delay, but rather on the nature and timing of the claim.

In the present case, the National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the rejection of the Appellant’s belated claim in the ongoing Corporate Insolvency Resolution Process (CIRP). The Appellant had filed a claim of ₹18.50 crores nearly 548 days after the lapse of the 90-day period prescribed under Regulation 12 of the CIRP Regulations, following the public announcement made by the Interim Resolution Professional (IRP). The claim arose out of alleged contractual breaches pursuant to Consortium and Joint Venture Agreements entered into with the Corporate Debtor in 2016 and 2017, which eventually led to disputes and a criminal complaint by the Appellant in 2021. However, the Appellant failed to submit any claim until much later, even after receiving a Section 8 Demand Notice from the RP for ₹9.35 crores and after the RP had initiated proceedings under Section 9 of the IBC against it.

The Appellant contended that the RP had rejected its claim without conducting a proper inquiry and had exceeded the powers granted under the IBC, which were limited to verification and collation of claims. It was argued that the RP could not adjudicate on the merits of complex contractual disputes and that its rejection of the claim, despite it being filed before the Committee of Creditors (CoC) approved the resolution plan, was arbitrary and against the spirit of judicial pronouncements such as Swiss Ribbons Private Limited and Another v. Union of India and Others, REEDLAW 2019 SC 01504; Prasad Gempex v. Star Agro Marine Export Pvt. Ltd.; and State Tax Officer (1) v. Rainbow Papers Limited, REEDLAW 2022 SC 09519. The Appellant further asserted that Regulation 12’s timelines were directory and not mandatory, and delay alone could not be the sole reason for claim rejection.

In contrast, the RP argued that the claim, being excessively delayed and filed only after Section 9 proceedings had been initiated against the Appellant, was an afterthought intended to counter the pending litigation. The RP emphasized that the resolution process had reached an advanced stage, with plans already under consideration by the CoC, and that admitting a new and disputed claim involving unadjudicated damages would unfairly disrupt the CIRP. It was asserted that the RP, lacking adjudicatory authority, could not accept speculative and contingent claims like those relating to alleged over-invoicing, GST input losses, and anticipated profits, without any judicial determination.

The Tribunal, after evaluating the facts and applicable law, concurred with the RP’s reasoning. It held that the RP had rightly exercised its statutory obligation under the IBC by verifying and rejecting the claim through a detailed communication dated 15.09.2023. The Appellant’s claim, being founded on contractual disputes yet to be adjudicated by any judicial forum, could not be admitted within the CIRP framework where the RP’s powers were strictly administrative in nature. The NCLAT also noted that the Appellant had ample opportunity to file its claim within the prescribed time, and its failure to do so could not be condoned at such a belated stage, particularly in view of the pending Section 9 proceedings and the nearing conclusion of the resolution process. The reliance on Rainbow Papers was misplaced, as the rejection in this case was not solely due to delay but also due to the unsubstantiated and contingent nature of the claim.

Finding no procedural irregularity or arbitrariness in the actions of the RP, and holding that the RP acted within the bounds of its authority, the Appellate Tribunal upheld the Adjudicating Authority’s decision and dismissed the appeal, thereby reaffirming the importance of adherence to procedural timelines and the limited adjudicatory role of resolution professionals under the IBC framework.

Mr. Gaurav Mitra, Mr. Aditya Gauri, Mr. Amar Vivek, Ms. Damini Srestha, Mr. Ishan Roy, Mr. Anant Jain and Ms. Lavanya, Advocates, represented the Appellant.

Mr. Akshay Goel, Ms. Pratiksha Bansal, Mr. Harsh Jadon, Advocates, appeared for the Respondent along with Mr. Rajiv Bhatnagar, RP in person.

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