In the realm of insolvency and bankruptcy proceedings, the Resolution Professionals (RPs) and Interim Resolution Professionals (IRPs) play a crucial role. However, it’s essential to understand that their powers are primarily administrative, not adjudicatory. This distinction has far-reaching implications, as elaborated below:
1. Administrative vs. Adjudicatory Powers: RP/IRP does not have adjudicatory powers. RP/IRP only has administrative powers. (Swiss Ribbons Pvt. Ltd. & Anr vs Union of India (AIR 2019 4 SCC 17)
2. Duty to Verify Claims: RP/IRP has a duty to verify the claims (Regulation 13(1)).
“13. Verification of claims.
(1) The interim resolution professional or the resolution professional, as the case may be, shall verify every claim, as on the insolvency commencement date, within seven days from the last date of the receipt of the claims, and thereupon maintain a list of creditors containing names of creditors along with the amount claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims, and update it.”
3. Seeking Additional Evidence: The RP/IRP may call for such other evidence or clarification as he deems fit from a creditor for substantiating the whole or part of its claim (Regulation 10).
“10. Substantiation of claims.
The interim resolution professional or the resolution professional, as the case may be, may call for such other evidence or clarification as he deems fit from a creditor for substantiating the whole or part of its claim”
4. Role in Collating and Maintaining Claims: IRP is supposed to receive and collate all the claims submitted by the creditors (section 18) and maintain the updated list of claims (section 25). The RP/IRP is required to maintain a list of creditors along with the amount claimed, the amount of the claims admitted and security interest if any (Regulation 13(1)).
“18. Duties of interim resolution professional.
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(b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15”
“25. Duties of resolution professional.
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(e) maintain an updated list of claims;”
5. Refusal to Accept Time-Barred Claims: Even in decision of Disciplinary Committee (IBBI), dated 26.05.2023 in the matter of Mr. Gopal Lal Baser it has been mentioned that it is the duty of the RP to not accept time barred claims.
6. Conclusion – Administrative Role with Evaluation:
a. The duty to verify a claim cannot be without a sequitur. Therefore, these rules out a mechanical activity by the RP/IRP in simplicitor collating whatever claims are received without any application of mind.
b. Regulation 10 empowers the RP/IRP to seek additional evidence or clarification from a creditor. Thus, the RP/IRP is required to verify a claim and if particulars are found to be inadequate or unclear further clarification/evidence may be sought.
c. Regulation 13(1) clearly distinguishes between claim received and claim admitted. This regulation also inheres due application of mind by the RP/IRP while examining the claims of the creditors.
d. Therefore, the RP/IRP is required to verify, seek substantiation, evaluate the claims as received and after due application of mind, to admit such part of the claim (0-100%) as is found admissible in the judgment of the RP/IRP.
e. Still we are faced with the finding of the Supreme Court in Swiss Ribbons case that the jurisdiction of the RP is administrative and not adjudicatory. This observation cannot be wished away and needs to be harmonized with the evolution of thoughts set put in clause a to d above. In my view the powers of the RP are administrative and not adjudicatory in the sense that any adjudication requires compliance with the tenets of the natural justice. Thus, if the powers of the RP were adjudicatory, the RP would be occupying a quasi-judicial position and before refusing to admit a claim partly or fully the RP would have been required to be offered an opportunity of being heard to the creditor in the question. As against that an administrative action does not involve exercise of any quasi-judicial power even as it involves application of mind by the person discharging the administrative functions. Therefore, in such cases the principle of natural justice is not attracted.
f. As per Regulation 13(2) the list of claims shall be available for inspection by the persons who submitted proofs of claim. If the creditor is not satisfied with the decision of the RP/IRP the creditor has liberty to approach the adjudicating authority inter alia under Rule 11 of NCLT Rules. Since the decision of RP/IRP is not in the nature of adjudication the proceedings before NCLT shall be original proceedings and not an appeal under the code.
g. Therefore, the RP/IRP while admitting a claim has to evaluate issues like limitation (what cannot be done directly should not be done indirectly), prima facie tenability of the claim and admissibility of the contention of the claimant and make a judgment about whether the claim is to be admitted fully or partly or none at all.
In summary, RPs/IRPs hold administrative powers but are actively involved in evaluating claims, ensuring that only valid claims are admitted. The administrative nature of their role does not involve quasi-judicial functions and, therefore, does not trigger the principles of natural justice.
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