RP Can Revisit Admitted Claim After Verification Fails To Establish Financial Debt: NCLAT New Delhi

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, on 1 September held that a Resolution Professional (RP) can revisit an earlier admitted claim during subsequent verification if the material on record fails to establish the existence of an independent financial debt.

A Bench comprising Judicial Member Justice N. Seshasayee with Technical Members Arun Baroka and Indevar Pandey dismissed Somani Worsted Limited's appeal against the National Company Law Tribunal's (NCLT) order refusing to restore its claim to the list of creditors and reconstitute the Committee of Creditors (CoC). It observed:

“Once the RP, during the process of verification, found that the Appellant had failed to establish an independent financial debt against the Corporate Debtor, he was justified in revisiting the earlier admission of the claim. The RP is required to verify the genuineness of every claim on the basis of the material available on record and cannot mechanically continue an incorrect admission.”

Celebration City Projects was admitted into the Corporate Insolvency Resolution Process (CIRP), following which Somani Worsted submitted a claim of Rs. 18.72 crore as a financial creditor in the class of real estate allottees. The RP initially admitted the claim to the extent of Rs. 18.84 crore, enabling Somani Worsted to participate in CoC meetings and exercise voting rights.

Subsequently, a related party creditor raised objections to Somani Worsted's claim. The RP sought further documents and clarification from Somani Worsted to verify the claim. After examining the material, the RP categorised the transaction as suspicious and removed Somani Worsted's name from the list of creditors.

The Tribunal found that Somani Worsted had originally paid Rs. 13.60 crore to an entity other than Celebration City Projects. It also noted that Somani Worsted did not produce any bank statement, RTGS advice, payment instruction or other banking record showing the actual transfer of the funds to the Corporate Debtor.

It further noted that the entities were closely connected and operated under common management and control. The documents also showed that they had a common registered address. It observed that these factors did not, by themselves, invalidate the transaction, but warranted greater scrutiny of the internal records.

Further, the Bench held that mere journal entries or book adjustments, without any corresponding banking trail, cannot by themselves establish a legally enforceable financial debt under the Insolvency and Bankruptcy Code, 2016.

On the RP's authority to verify claims, the Tribunal relied on Regulation 13(1) of the CIRP Regulations, which requires the RP to verify claims and maintain and update the list of creditors.

It also relied on its ruling in Mr. Umesh Kumar v. Mr. Narendra Kumar Sharma, Company Appeal (AT) (Ins.) No. 100 of 2024, where it held that the RP is expected to exercise due diligence while examining claims and is not required to merely rubber stamp them.

Accordingly, the NCLAT upheld the RP's decision to revisit Somani Worsted's claim after subsequent verification failed to establish an independent financial debt.