IBBI Action Against RP In Other CIRPs Cannot Invalidate Claim Verification In Chandigarh Overseas CIRP: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi on Tuesday observed that disciplinary proceedings initiated by the Insolvency and Bankruptcy Board of India (IBBI) against the Resolution Professional (RP) in other Corporate Insolvency Resolution Processes (CIRPs) cannot be relied upon to invalidate the claim verification exercise undertaken in the CIRP of Chandigarh Overseas Pvt. Ltd.

The bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra observed, "We are of the view that disciplinary action in other cases are not relevant for invalidation of the claim verification exercise undertaken by the RP in the present CIRP. The IBC envisages distinct remedial mechanisms for regulatory oversight of insolvency professionals, which cannot be conflated with adjudicatory proceedings under Section 60(5) of the IBC. Hence, the Adjudicating Authority was justified is not being swayed by the rationale of this argument either.”

The present appeal was filed against the decision of the NCLT Chandigarh, which had dismissed an application filed by the appellant-homebuyer under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), holding that the application was procedurally defective and barred on account of lack of locus standi.

Chandigarh Overseas Pvt. Ltd. entered the corporate insolvency resolution process on February 27, 2023. Arvind Kumar was first appointed as the interim resolution professional and later continued as the resolution professional.

Following a public announcement inviting claims from creditors, Kumar carried out the exercise of verifying and admitting claims. The Committee of Creditors later approved the resolution plan on March 19, 2024 with a vote of 99.21 percent.

The dispute began after a whistleblower communication from a homebuyer raised concerns about certain claims admitted during the process. Acting on this, the appellant, himself a homebuyer whose claim had been admitted in the CIRP, approached the NCLT. He alleged that Kumar had admitted claims that did not appear in the corporate debtor's statutory books. According to him, some of the claims were duplicate, some had already been satisfied, and others were allegedly connected to related parties.

The appellant contended that the NCLT had erred in dismissing his plea simply because it was titled an “Intervention Application.” He argued that the tribunal should have examined the substance of the reliefs sought. Those reliefs included rejection of what he described as fraudulently admitted claims, a fresh verification of the list of creditors, and an independent forensic audit of the corporate debtor's records.

The appellate tribunal did not accept this line of argument. Referring to the Supreme Court's decision in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd., it noted that insolvency law treats homebuyers as a class of financial creditors. Once a decision is taken by the majority within that class, the minority must abide by it.

In this case, the resolution plan had already been approved with a vote of 99.21 percent. The appellant had also participated in the meeting where the plan was approved. The tribunal said that a single homebuyer could not seek to reopen issues relating to verification of claims or the voting process after such approval, particularly without proper authorisation from other homebuyers.

It also examined the allegations of fraudulent claim admission. The tribunal found that the accusations were not supported by solid evidence. Instead, the pleadings relied on tentative expressions and speculative assertions drawn from a whistleblower communication.

The appellant had also relied on disciplinary proceedings initiated by the Insolvency and Bankruptcy Board of India against Kumar in other insolvency processes. The tribunal rejected this argument as well.

Finding no error in the NCLT's reasoning, the appellate tribunal upheld the earlier order. The appeal was dismissed.