2024 (2) TMI 735 - AT - Insolvency and Bankruptcy

Scope of duty of RP - Seeking acceptance of the claims which had been rejected by the Resolution Professional - Proof of services provided and debts - RP did not convey any confirmation nor was any query raised until in response to a letter sent to the RP seeking status of his claims - it is contended by Appellant that the RP on his own had never requested the Appellant to provide further information or documents - whether the process and manner of treatment of the claims by the RP in respect of the claims filed by the Appellant is violative of the provisions of the IBC? - HELD THAT - The RP had made it clear, time and again, that due to want of documents in support of their claims, the RP was unable to verify the claims of the Appellant. However, the Appellant failed to comply to the persistent request of the RP for documents. It was pointed out by the Learned Counsel for the Respondent that apart from unilaterally sending a composite invoice, the details of the services provided were not adequately explained by the Appellant except for enclosing a set of random snapshots of television news which find place at page 78-83A of the APB as against the scope of work claimed by the Appellant to be one which included generating positive stories, crisis management, tracking competitor news, overall media management etc. A glance at the proof of services provided on the other hand shows that it contained few newspaper advertisements on a film promotion. There are substance in the contention of the RP that not only were these media clippings skeletal and sketchy but that they were all issued on a single day while the invoice submitted was in respect of services performed for a period which was spread over more than one year. 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. In fact, determination of the tenability/validity of a contractual agreement falls in the realm of a civil dispute and therefore outside the scope and jurisdiction of both the Adjudicating Authority and the Appellate Tribunal. Be that as it may, this does not prevent the RP from seeking additional information from any creditor to substantiate his claims. In the present case, the Adjudicating Authority after considering in detail the entire facts and circumstances and material on record has rightly come to the conclusion that the claims submitted by the Appellant could not have been admitted in the CIRP of the Corporate Debtor. This inadequacy of documents to substantiate their claims by the Appellant has been noticed by the Adjudicating Authority in the impugned order - It is quite clear from the sequence of events in the present facts of the case that the RP had been consistently pointing out that he is not in a position to verify the claims due to want of documents substantiating the claims. There are no incidence of wilful negligence, or deliberate stone-walling of the claims on the part of the RP in dealing with the claim preferred by the Appellant. The Adjudicating Authority is agreed upon that the RP was well within his rights to exercise the discretion of seeking additional information from the Appellant and for which purpose he gave reasonable opportunity. The RP had made earnest and credible effort to verify the claims submitted by the Appellant and his conduct stands in sharp contrast to rather lacklustre effort by the Appellant in providing information to substantiate his claim. Thus, the bona-fide and fairness of the RP cannot be doubted. There are no error on the part of the Adjudicating Authority in affirming the conclusion drawn by the RP that the hindrance faced by him in deciding the claim of the Appellant was squarely on account of failure on the part of the Appellant to hand over proof of alleged services - there are no cogent grounds which warrants any interference in the impugned order - appeal dismissed.

Summary

Issues Involved:
1. Validity of the Agreement and Proof of Services Rendered by the Appellant.
2. Role and Powers of the Resolution Professional (RP) in Verifying Claims.
3. Adequacy of Documentation Provided by the Appellant.
4. Adjudicating Authority's Decision on the Claims.

Summary:

1. Validity of the Agreement and Proof of Services Rendered by the Appellant:
The Appellant, an Operational Creditor, claimed that they were hired as a media management consultant by the Corporate Debtor under a Consultancy Agreement dated 01.06.2016. The Appellant submitted that payments were made until April 2018, and claims were filed with the RP during the insolvency process. The RP rejected the claims questioning the legitimacy of the Agreement and the invoices raised. The RP argued that the Agreement was in the name of a different entity, M/s Victory Projects, and lacked proper authorization, thus questioning its legal validity.

2. Role and Powers of the Resolution Professional (RP) in Verifying Claims:
The RP's role under the Insolvency and Bankruptcy Code (IBC) includes receiving, collating, and verifying claims, but not adjudicating them. The RP is authorized to seek substantiation of claims under Regulation 10 of the CIRP Regulations. The RP argued that the Appellant failed to provide adequate proof of services, which was necessary for verifying the claims. The Appellant contended that the RP overstepped by demanding proof of services, which they argued was beyond the RP's jurisdiction.

3. Adequacy of Documentation Provided by the Appellant:
The Appellant provided invoices, bank statements, and GST details as proof of debt. However, the RP found these documents insufficient to verify the claims, stating that the documents did not form part of the Corporate Debtor's records. The RP repeatedly requested additional documents to substantiate the claims, which the Appellant failed to provide. The Appellant's submissions included random snapshots of television news and newspaper advertisements, which the RP found unconvincing and inadequate.

4. Adjudicating Authority's Decision on the Claims:
The Adjudicating Authority directed the RP to reconsider the claims, but the RP maintained their rejection due to insufficient documentation. The Authority noted that the Appellant could not produce any document to substantiate the services rendered. The Tribunal found no infirmity in the RP's decision, emphasizing the RP's responsibility to verify claims diligently. The Tribunal affirmed that the RP acted within their rights to seek additional information and that the Appellant failed to substantiate their claims adequately.

Conclusion:
The National Company Law Appellate Tribunal (NCLAT) dismissed the appeal, affirming the Adjudicating Authority's order. The Tribunal held that the RP was justified in seeking additional documentation and that the Appellant failed to provide sufficient proof of services rendered. The RP's actions were deemed fair and within the scope of their administrative powers under the IBC. The appeal was found to be devoid of merit and dismissed with no order as to costs.