Resolution Professional to verify authenticity of claims: NCLAT

Resolution Professional to verify authenticity of claims: NCLAT

The National Company Law Appellate (NCLAT) in its recent judgement set aside the order of the National Company Law Tribunal (NCLT), Kolkata Bench to hold that the NCLAT is not persuaded about the authenticity and veracity of the ledger accounts confirmations and therefore, the Tribunal was of the opinion that they cannot be treated as written acknowledgement of balance debt.

This decision comes in pursuant to the dismissal of the application filed by P.M. Cold Storage Pvt. Ltd. by the NCLT. The bench was considering various documents submitted by New Hind Silk House Private Limited (NHSH) regarding its claim along with Form C and held that RP has considered and screened all the documents properly as per the provisions of IBC, and CIRP Regulations and further the allegations made by the Applicant have not been substantiated,

In the arguments before the Hon'ble NCLAT, RP submitted that he has accepted the confirmation of ledger accounts of the corporate debtor with respect to NHSH as on 01.04.2016 and 01.04.2017. RP, in its counter affidavit, had also stated that "the directors of the corporate debtor have also confirmed the genuineness of the balance confirmations',

The Learned Counsel for Appellant challenged the signatures of the representatives of the corporate debtor on both these documents and stated that the corporate debtor has shied away from disclosing the identity of directors, who have signed the balance of statement acknowledging the said debt and the name or identity of such directors has nowhere been disclosed.

The Counsel for Appellant produced before the Hon'ble NCLAT the record relating to the Corporate Debtor uploaded on the Ministry of Corporate Affairs website to show that the name of directors who were on the board of Corporate Debtor as on 1.4.2016 and also 1.4.2017, their signatures as they appear on Form DIR-12 filed by the Corporate Debtor with the Registrar of Companies (and uploaded on the MCA portal) to show that the signatures, as they appear in the balance confirmations given by the Corporate Debtor's directors and the signatures of the Corporate Debtor's directors, who were part of the board of Corporate Debtor on the relevant dates do not match at all.

The NCLAT noted that the fact that the said directors, namely Shrestha Jha resigned on 30.3.2019 and Sandeep Agarwal and Dhruv Agarwal resigned on 8.1.2019 from the position of Directorship of Corporate Debtor and the new directors Atul Kumar Mandal and Nilay Swarnakar were inducted into the board of directors on 5.1.2019. It does not stand to reason and logic as to how the present directors could authenticate the signatures of past directors who supposedly signed the confirmation of documents on 1.4.2016 and 1.4.2017. Moreover, these balance confirmations were ostensibly given in person to the RP as claimed by the RP: hence, they should normally contain the signature of the person receiving these documents in the office of RP.

In view of the afore-stated reasons, the Hon'ble NCLAT held that "we are not persuaded about the authenticity and veracity of ledger account confirmations and are of the opinion that they cannot be taken as a written acknowledgement of the balance debt."

The Hon'ble NCLAT, while considering the point raised by the Learned Counsel for Respondent No. 2 that the appeal suffered from the non-joinder of two directors, who have signed the ledger account confirmations but were not enjoined parties in the Section 7 application before the Adjudicating Authority nor in this appeal. The Hon'ble NCLAT observed that the acceptance/admission of claim of NHSH was done by the RP and the Appellant is affected by this action of RP. The Appellant has joined the RP as a respondent in the appeal, and therefore, the Hon'ble NCLAT held that the appeal is properly constituted.

It was also held that the corporate debtor has paid TDS on interest payable cannot be considered as acknowledgment in writing of the liability by the corporate debtor, and therefore, such TDS payment will not have any effect of being an acknowledgment of said debt.

Given the finding that since the voting share in the CoC is an extremely relevant and vital element in the CIRP insofar as the insolvency resolution of the Corporate Debtor is concerned. It was the duty of the RP to exercise necessary care and diligence in verifying the claims and scrutinize the documents submitted with Form C for genuineness and authenticity. Such exercise does not appear to have been done by the RP in the present case. The Hon'ble NCALT urged the Insolvency and Bankruptcy Board of India to investigate this matter further regarding the conduct of RP and take necessary action under the regulation.

The Hon'ble NCLAT, after hearing the arguments of the Counsel for Appellant concluded that documents on which the RP relied on in accepting and admitting the claim of NHSH and inducting it as a member of CoC do not inspire confidence and should not have been relied upon by the RP in admitting the claim of the NHSH being within limitation. The Adjudicating Authority has, therefore, committed an error in upholding the admission by RP of the claim of NHSH. Accordingly, the Impugned Order was set aside and directed that NHSH shall not be a member of CoC in the CIRP of Goouksheer Farm Fresh Pvt. Ltd.