NCLAT Urges IBBI To Ensure Resolution Plans Don't Allow Re-Verification Of Claims By SRA

The National Company Law Appellate Tribunal (NCLAT) at Delhi on Tuesday observed that the Insolvency and Bankruptcy Board of India (IBBI) should ensure that resolution plans do not ordinarily contain clauses allowing successful resolution applicants (SRAs) to re-verify claims, cautioning that such provisions create uncertainty in the insolvency process.

The observation came in a case where a homebuyer's claim had been admitted in full during the corporate insolvency resolution process (CIRP), but the SRA later sought to re-scrutinise it on the basis of a verification clause in the resolution plan.

A bench of Judicial Member Justice N. Seshasayee and Technical Member Arun Baroka observed, “Ultimately, it should be the resolution professional who has to adjudicate the claims of the home buyers. In this case even though he had admitted the claim of the Appellant to the full extent, but due to the verification clause, uncertainty exists. To avoid such situations, IBBI should take care that normally no such verification clause exists in the resolution plan, and even if it exists, the finalization of the claims should not be dependent on the Successful Resolution Applicant, who could be the ultimate beneficiary in rejecting the claims."

The case arose from the CIRP of Maple Realcon Pvt. Ltd., developer of the “Misty Heights” project in Greater Noida. The appellant had paid Rs.47 lakh for a flat, and his claim was admitted in full by the resolution professional (RP), forming part of the list of financial creditors.

A resolution plan submitted by Apex Heights Pvt. Ltd. was approved in 2020 and provided for delivery of flats but also contained a clause permitting verification of original documents.

Despite this, the SRA did not hand over possession within the stipulated timelines and later questioned the authenticity of the homebuyer's documents. The homebuyer approached the National Company Law Tribunal (NCLT), which disposed of the plea by directing him to approach the SRA for scrutiny, while keeping the flat on hold pending verification.

Before the NCLAT, the homebuyer argued that his claim had been fully admitted and never kept under verification, and that the SRA was using the verification clause to delay compliance with the resolution plan. The SRA, on the other hand, contended that claims were only provisionally admitted and required scrutiny to establish their authenticity.

The tribunal noted that the appellant's claim had been admitted during CIRP and formed part of the creditor records considered for approval of the resolution plan. In such circumstances, it held that the SRA could not reopen or reject the claim after the plan had attained finality and binding force.

On the scope of the verification clause, the tribunal held that “a holistic reading of the Clause would show that the extent of the SRA's power under the Resolution Plan was to merely verify the original documents and enter into a fresh Builder Buyer Agreement. In so far as rejection of claims are concerned, the jurisdiction of the SRA extended to finding that the original documents did not exist. Once the documents were in existence, the SRA could not reject claims.”

The tribunal further observed that the verification exercise was required to be completed within a limited timeframe under the plan, and that prolonged or indefinite scrutiny was impermissible.

Reiterating settled principles, the tribunal observed that “The successful applicant therefore takes over the corporate debtor "on an as is where is basis," with the liabilities as they are finalized by the RP and CoC. They cannot be given a new right to unilaterally alter the liabilities of the Corporate Debtor to their own benefit after a binding plan has been approved.”

It also criticised the conduct of the SRA, observing that “the conduct of the SRA to initially keep the claim of the Appellant pending and now questioning the authenticity of the documents is questionable and we find the arguments of the respondent-SRA not to accept the claim of the Appellant as a home-buyer are not sustainable. We cannot countenance such an approach of the SRA and deserves to be deprecated.”

Emphasizing that claim determination lies with the resolution professional, the tribunal further observed that “it is the resolution professional, who has the final say in the matter. Even if it was to be further verified, there are sufficient materials on record which go on to confirm the claim of both the appellants. In such a situation, the SRA doesn't have indefinite period available to him to further scrutinize the claims, which essentially fall within the jurisdiction of the resolution professional"

Accordingly, the NCLAT allowed the appeal and set aside the impugned order, clearing the way for enforcement of the homebuyer's entitlement under the resolution plan