NCLAT upholds Resolution Professional's rejection of claims due to insufficient documentation despite repeated requests for proof

NCLAT dismissed appellant's challenge to Resolution Professional's rejection of claims. Appellant failed to provide adequate documentation despite RP's repeated requests for proof of services spanning over one year. While appellant submitted composite invoice and random television news snapshots, evidence was skeletal and issued on single day for year-long claimed services. NCLAT held RP acted within discretion seeking additional information and gave reasonable opportunity. No wilful negligence or stone-walling by RP found. Adjudicating Authority correctly concluded claims couldn't be admitted in CIRP due to insufficient substantiation by appellant.

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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.

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