Section 18 IBC | Resolution Professional Can Seek Clarifications to Verify Claims but Cannot Adjudicate : NCLAT

The National Company Law Appellate Tribunal has clarified that a Resolution Professional under the Insolvency and Bankruptcy Code, 2016, is empowered to seek clarifications to verify claims but cannot act as an adjudicator. This judgment reinforces the administrative, not judicial, role of the RP in the Corporate Insolvency Resolution Process, setting a critical precedent for operational creditors seeking full claim admission.

Background & Facts

The Dispute

The dispute arises from the Corporate Insolvency Resolution Process (CIRP) of Logix City Developers Pvt. Ltd., initiated on 17.08.2022. The Appellant, New Okhla Industrial Development Authority (NOIDA), filed a claim of Rs. 6,07,74,76,966/- as a secured operational creditor, seeking admission of amounts related to farmer compensation and time extension charges under a 90-year lease deed executed on 08.06.2011 for Plot No. GH-02, Sector 143, Noida, covering 1,00,080.98 sq. mtrs.

Key Facts

• On 08.06.2011, NOIDA leased 1,00,080.98 sq. mtrs. to Logix City Developers for housing development.
• On 21.10.2011, the Allahabad High Court, in Gajraj & Ors. v. State of U.P., directed an additional 64.7% compensation to farmers, with liberty to recover from allottees.
• The Supreme Court upheld this judgment in Savitri Devi v. State of U.P. (2015) 7 SCC 21.
• NOIDA issued office orders on 20.12.2013, 04.04.2014, 14.07.2014, and 04.08.2014 directing recovery of enhanced compensation from allottees.
• On 22.05.2017, NOIDA wrote to the Corporate Debtor demanding Rs. 2,93,97,586.90 as its share of additional farmer compensation.
• On 30.10.2018, a tripartite sub-lease deed was executed for 13,961 sq. mtrs. in favor of Docile Buildtech Pvt. Ltd., reducing the Corporate Debtor’s leased area to 86,119.98 sq. mtrs.
• The land intended for Arable Builders Pvt. Ltd. (12,486.08 sq. mtrs.) was never sub-leased and remained under the Corporate Debtor’s lease.
• CIRP commenced on 17.08.2022.
• On 01.09.2022, NOIDA filed its claim under Form 'B' for Rs. 6,07,74,76,966/-.
• On 03.09.2022, the Resolution Professional (RP) provisionally admitted Rs. 5,13,97,26,671/-, excluding Rs. 6,81,99,639/- under farmer compensation and time extension heads.
• On 23.03.2023, NOIDA began exchanging emails with the RP, submitting revised calculations.
• On 01.11.2023, NOIDA revised its time extension claim to Rs. 47,34,10,209.88 (up to 17.08.2022), reducing it by Rs. 39,71,258.12 due to prior miscalculation.
• On 06.11.2023, the RP admitted Rs. 6,00,92,77,327/-.
• On 18.10.2023, the NCLT directed the RP to re-examine the claim in IA No. 2792/2023.
• On 05.03.2024, the NCLT dismissed IA No. 6075/2023, holding no non-compliance with its earlier order.

Procedural History

• 08.06.2011: Lease deed executed between NOIDA and Logix City Developers.
• 21.10.2011: Allahabad High Court judgment in Gajraj & Ors. v. State of U.P..
• 22.05.2017: NOIDA’s demand letter for Rs. 2,93,97,586.90.
• 30.10.2018: Sub-lease deed executed for 13,961 sq. mtrs. to Docile Buildtech Pvt. Ltd.
• 17.08.2022: CIRP commenced.
• 01.09.2022: NOIDA files claim of Rs. 6,07,74,76,966/-.
• 03.09.2022: RP provisionally admits Rs. 5,13,97,26,671/-.
• 23.03.2023: First email exchange on claim substantiation.
• 16.05.2023: IA No. 2792/2023 filed before NCLT.
• 18.10.2023: NCLT directs RP to re-examine claim.
• 31.10.2023: RP seeks clarifications on farmer compensation.
• 06.11.2023: RP admits Rs. 6,00,92,77,327/-.
• 12.11.2023: NOIDA submits revised calculation for time extension.
• 21.11.2023 & 25.11.2023: RP sends reminder emails for documentation.
• 05.03.2024: NCLT dismisses IA No. 6075/2023.
• 05.06.2024: Appeal filed before NCLAT.
• 30.06.2026: NCLAT delivers judgment.

The Parties' Positions

For the Appellant (NOIDA)

• Argued that the RP’s refusal to admit Rs. 6,42,28,380.88 (Rs. 5,90,71,649 for farmer compensation + Rs. 51,56,731.88 for time extension) violates Section 25(2)(e) of the IBC.
• Relied on Swiss Ribbons Pvt. Ltd. v. Union of India and Anuj Jain v. Axis Bank Ltd. to assert that the RP has no adjudicatory power.
• Claimed that the RP’s demand for documents (e.g., payment dates, area breakdown) was beyond verification and amounted to adjudication.
• Asserted that the Allahabad High Court and Supreme Court judgments bound the RP to admit the farmer compensation.
• Contended that the RP’s own calculations were flawed and that the NCLT’s 18.10.2023 order mandated full admission.

For the Respondent (RP)

• Stated that the claim for farmer compensation was unsubstantiated: NOIDA failed to provide evidence of total compensation paid, area covered, or allocation to the Corporate Debtor.
• Noted that NOIDA’s initial claim was for 1,00,080.98 sq. mtrs., but the Corporate Debtor’s liability was only for 86,119.98 sq. mtrs., and the revised calculation retained the same amount without adjustment.
• Argued that the time extension claim was miscalculated: NOIDA initially claimed up to 07.09.2022, but CIRP commenced on 17.08.2022.
• Demonstrated that the correct time extension amount for 86,119.98 sq. mtrs. up to 17.08.2022 was Rs. 47,34,10,209.88, and the RP admitted Rs. 46,82,53,478/- after correcting a mathematical error in the 5th year calculation.
• Emphasized that Regulation 10 of the CIRP Regulations permits seeking clarifications for substantiation.
• Highlighted that NOIDA itself reduced its claim by Rs. 39,71,258.12 and then reverted to the original inflated figure in the appeal.

Relief Sought

NOIDA sought:

• Admission of the entire claim of Rs. 6,07,74,76,966/-.
• Direction to the RP to admit the unadmitted amount of Rs. 6,42,28,380.88.
• Setting aside of the NCLT’s order dated 05.03.2024.

The Legal Issue

The central question was whether a Resolution Professional under the IBC may seek additional documentation to verify a claim, and whether failure to provide such documentation justifies non-admission of the claim, even when judicial precedents support its underlying entitlement.

Arguments Presented

For the Appellant

The Appellant relied on Swiss Ribbons Pvt. Ltd. v. Union of India and Anuj Jain v. Axis Bank Ltd. to argue that the RP’s role is purely administrative and limited to collection and verification under Section 18 and Regulation 13 of the CIRP Regulations. It contended that the RP cannot demand documents beyond what is necessary for verification, and that the NCLT’s 18.10.2023 order had already directed full admission. The Appellant asserted that the RP’s request for details on compensation payment dates, area allocation, and percentage share constituted an impermissible adjudication of rights, violating the principle that only the Adjudicating Authority can determine the validity of claims.

For the Respondent

The Respondent argued that Regulation 10 of the CIRP Regulations explicitly empowers the RP to seek any evidence or clarification deemed necessary to substantiate a claim. It demonstrated that NOIDA’s claim for farmer compensation was internally inconsistent: the amount claimed remained Rs. 2,93,97,587/- even after reducing the land area from 1,00,080.98 sq. mtrs. to 86,119.98 sq. mtrs., with no explanation for the basis of the figure. For time extension, the RP showed that NOIDA’s calculation included 21 extra days beyond the CIRP commencement date and contained a mathematical error in the 5th year’s interest computation. The RP maintained that its actions were strictly within the scope of verification and not adjudication.

The Court's Analysis

The NCLAT conducted a detailed review of the IBC and the CIRP Regulations, emphasizing the distinction between the RP’s administrative duties and the liquidator’s quasi-judicial powers. The Court observed that while the liquidator under Section 40 may admit or reject claims, the RP’s function under Regulation 13 is to verify and update claims, with Regulation 10 explicitly permitting the RP to seek additional evidence.

"The resolution professional is given administrative as opposed to quasi-judicial powers... It was only seeking additional information to verify the claims, and such an argument of the applicant is therefore unsustainable and rejected."

The Court rejected the Appellant’s reliance on Swiss Ribbons and Anuj Jain, noting that these cases affirmed the RP’s lack of adjudicatory power but did not preclude the RP from seeking clarifications to perform its verification duty. The Court held that the RP’s request for five specific details - total compensation paid, area covered, land share, percentage allocation, and payment date - was reasonable and necessary to substantiate a claim of over Rs. 59 crores.

Regarding the time extension claim, the Court accepted the RP’s recalculations. It noted that NOIDA’s initial claim of Rs. 47,73,81,468/- included 21 days beyond the CIRP commencement date (17.08.2022), and that the RP’s admitted amount of Rs. 46,82,53,478/- was based on a corrected calculation of the 5th year’s interest, which NOIDA itself had acknowledged as erroneous in its revised submission.

The Court further noted that NOIDA had been aware of the resolution plan’s proposed settlement of Rs. 20 crores and had not objected to it, indicating a pragmatic acceptance of partial recovery. The NCLAT concluded that the RP had acted within its statutory mandate and that the NCLT’s dismissal of the application was legally sound.

The Verdict

The appeal was dismissed. The NCLAT upheld the NCLT’s order dated 05.03.2024 and confirmed that the Resolution Professional was justified in not admitting Rs. 6,42,28,380.88 of NOIDA’s claim due to lack of substantiation. The unadmitted amount comprised Rs. 5,90,71,649 for farmer compensation and Rs. 51,56,731.88 for time extension. No costs were awarded. The RP’s admission of Rs. 6,00,92,77,327/- stands final.

What This Means For Similar Cases

Verification Requires Substantiation, Not Assumption

• Practitioners must ensure that claims submitted under CIRP are accompanied by complete, consistent, and verifiable documentation.
• A claim based on judicial precedent (e.g., Gajraj) is not automatically admissible; the RP must be able to trace the calculation to the Corporate Debtor’s liability.
• Failure to explain the basis of a claimed amount - even if supported by a court order - will result in non-admission.

RP’s Right to Seek Clarifications Is Absolute

• The RP may request any document or clarification necessary to verify a claim under Regulation 10, even if the creditor deems it burdensome.
• Demands for breakdowns of area, payment dates, or allocation percentages are not adjudicatory but essential for verification.
• Courts will not interfere if the RP’s requests are reasonable and tied to the claim’s mathematical or factual basis.

Inconsistent Calculations Undermine Credibility

• If a creditor revises a claim downward due to error and then reverts to the original inflated figure in appeal, the tribunal will view the claim as unreliable.
• Claims must be internally consistent: changing the land area without adjusting the amount claimed renders the claim unsubstantiated.
• Practitioners should audit all claim calculations before submission and retain all supporting records.