2025 (7) TMI 84 - AT - IBC

Rejection of application filed by the appellant - subject Club Suites have been allotted to other third parties - refusal to accept the claim of the appellant as allottees - theory of cancellation/surrender of the Club Suite - HELD THAT - RP s submission that on verification of the CRM data and books of the corporate debtor could not file any document to draw conclusion that applicant could be treated as financial creditor in a class. In the present case insofar as the payments by the appellants are concerned RP has not denied that payments are reflected in the records of the corporate debtor. Submission of the RP has also been noticed that many claimants approach RP with forged manufactured documents. Hence he was left with no option but to re-verify the CRM data and the books of account of corporate debtor. RP in the case of the appellant is not denying the payments received by the corporate debtor towards the units. Builder Buyer Agreement were brought by the appellant. No case has been set up that for allotment of units any other format of allotment letter was issued by the corporate debtor. There are no allotment letter by which the Club Suites are sought to be allotted to third parties have been referred to except the mention the date of agreement. In the facts of the present case the adjudicating authority was required to consider the applications filed by the appellant individually. Appellants application being based on individual facts of each case. In any event at least one of the applications filed by this appellants group was required to be considered in detail including the reply submitted by the RP to the application. The rejection of all the applications filed by the appellant were only on the basis of decision taken by the adjudicating Authority rejecting I.A. No.5177/2022. It is not even proved that basis of I.A. No. 5177/2022 is same as those of the applications I.A.1377/2023 and other applications filed by the appellant. The RP in the reply 30.07.2024 filed in Comp. App. (AT) (Ins.) No. 130/2024 has now set up a case of cancellation/surrender of the units by the appellant Vinod Khattar which was not even before the adjudicating authority in the reply filed by the RP which need consideration and findings by the adjudicating authority. The ends of justice be served in setting aside the order of the adjudicating authority dated 21.11.2023 insofar as I.A. Nos. 1377/2023 1375/2023 1376/2023 1385/2023. The aforesaid IAs are revived before the adjudicating authority for fresh consideration - appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in these appeals are:

• Whether the appellants, who entered into Buyers Agreements with the corporate debtor for Club Suites and paid the entire consideration, are entitled to be recognized as financial creditors in a class (allottees) in the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor.
• Whether the Resolution Professional (RP) was justified in rejecting the claims of the appellants as allottees solely on the ground that the Customer Relationship Management (CRM) data and books of account of the corporate debtor did not reflect any allotment in their favor.
• Whether the adjudicating authority erred in dismissing the interlocutory applications (IAs) filed by the appellants seeking admission of their claims as allottees, relying on the order in I.A. No. 5177/2022, without considering the individual facts and documents submitted by the appellants.
• Whether the RP's late assertion of cancellation/surrender of units by the appellants, which was not raised before the adjudicating authority, can be entertained at the appellate stage.
• The scope and standard of verification of claims by the RP in CIRP, particularly the reliance on CRM data and books of accounts vis-`a-vis documents such as Buyers Agreements and payment receipts.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement of appellants to be recognized as financial creditors (allottees) in CIRP

Relevant legal framework and precedents: The Insolvency and Bankruptcy Code (IBC) recognizes financial creditors as persons to whom the corporate debtor owes a financial debt. Allottees under a real estate project, having paid consideration and entered into Buyers Agreements, can be financial creditors if their claims are accepted. Precedents establish that recognition as financial creditor depends on proof of debt and allotment.

Court's interpretation and reasoning: The appellants had executed Buyers Agreements with the corporate debtor for Club Suites, paid the entire consideration (Rs. 35,70,000/- per unit), and received receipts. They also received assured returns for some time, with TDS deducted, indicating acceptance of their claim. The appellants filed claims as financial creditors in a class (allottees), which were initially admitted by the Interim Resolution Professional (IRP).

Key evidence and findings: The appellants produced Buyers Agreements dated 2013 and 2016, payment receipts, and correspondence including offer of possession letters. The RP did not deny receipt of payments reflected in the corporate debtor's records. However, RP relied on CRM data showing allotment of the disputed units to third parties and no record of allotment to appellants.

Application of law to facts: The appellants' claims are supported by contractual agreements and payment evidence, which prima facie entitles them to be recognized as financial creditors (allottees). The assured returns paid and recorded TDS further corroborate their status. The RP's rejection based solely on CRM data, without considering these documents, is questionable.

Treatment of competing arguments: RP argued that CRM data and books of account are authoritative and that many claimants submitted forged or manufactured documents, necessitating reliance on CRM data. RP also contended that some units were surrendered/cancelled by appellants and re-allotted to third parties. The appellants denied any cancellation or refund and challenged the RP's late introduction of surrender/cancellation claims.

Conclusions: The appellants have made a prima facie case for recognition as financial creditors (allottees) based on valid agreements and payments. The RP's rejection on CRM data alone, without detailed consideration of individual documents and facts, is not sustainable.

Issue 2: Validity of RP's reliance on CRM data and books of account to reject claims

Relevant legal framework and precedents: The RP is required under IBC to verify claims based on records of the corporate debtor, including books of account and other relevant documents. However, rigid reliance on CRM data or internal records without considering contractual documents may lead to injustice. Courts have held that RP must act fairly and consider all credible evidence.

Court's interpretation and reasoning: The adjudicating authority upheld RP's rejection of claims on the ground that CRM data and books of account did not show allotment in favor of appellants. The order in I.A. 5177/2022 emphasized that RP cannot rely on documents outside the corporate debtor's records to admit claims, to avoid encouraging malpractice.

Key evidence and findings: RP produced CRM data showing allotment of disputed units to third parties, but no allotment to appellants. However, appellants produced Buyers Agreements and receipts evidencing payment and contractual relationship. RP admitted payments received but treated appellants as unsecured creditors rather than financial creditors in a class.

Application of law to facts: While RP must verify claims against corporate debtor's records, contractual documents and payment evidence submitted by appellants form part of the record and cannot be ignored. The CRM data alone is insufficient to reject claims if contradicted by valid agreements and receipts.

Treatment of competing arguments: RP's concern about forged documents is legitimate, but blanket rejection based on CRM data without individual scrutiny is improper. Appellants' documents were not shown to be forged or invalid. RP's late assertion of cancellation/surrender without proof is also problematic.

Conclusions: RP's exclusive reliance on CRM data to reject claims is not justified. A balanced approach considering all relevant documents is required.

Issue 3: Whether adjudicating authority erred in dismissing IAs filed by appellants relying on order in I.A. 5177/2022

Relevant legal framework and precedents: Each claim/application before the adjudicating authority must be decided on its own facts and merits. Reliance on a prior order concerning a different claimant without detailed consideration of individual circumstances is improper.

Court's interpretation and reasoning: The adjudicating authority rejected all appellants' IAs by referring to the order in I.A. 5177/2022, which dealt with a different applicant whose counsel failed to produce allotment letters. The appellants in these appeals produced Buyers Agreements and payment receipts, which were not considered individually.

Key evidence and findings: The impugned order did not address the individual facts and documents of the appellants. RP's late introduction of surrender/cancellation claim was not considered by the adjudicating authority.

Application of law to facts: The adjudicating authority was required to examine each IA on its own merits, including the documents and replies filed. Blanket dismissal based on I.A. 5177/2022 order was improper.

Treatment of competing arguments: RP argued that the facts are identical, but appellants demonstrated distinct documentary evidence. The Tribunal found that the adjudicating authority failed to consider these differences.

Conclusions: The adjudicating authority's summary rejection of all IAs based on a prior order without individual consideration was erroneous.

Issue 4: Admissibility of RP's late assertion of cancellation/surrender of units

Relevant legal framework and precedents: New facts and contentions not raised before the adjudicating authority ordinarily cannot be introduced at the appellate stage without opportunity for the other party to respond. Fair procedure requires that such issues be first adjudicated by the adjudicating authority.

Court's interpretation and reasoning: RP's reply filed during the appeal stage introduced a new claim that appellant Vinod Khattar had submitted cancellation/surrender letters in 2016, which was not pleaded or considered earlier. The Tribunal noted that this requires consideration and findings by the adjudicating authority.

Key evidence and findings: RP annexed CRM screenshots and surrender reports as proof of cancellation. Appellant denied ever surrendering the units or receiving refund.

Application of law to facts: The Tribunal held that such new facts must be examined by the adjudicating authority in the first instance, allowing both parties to file additional affidavits and replies.

Treatment of competing arguments: RP sought to rely on these new facts to justify rejection; appellants opposed their admission without adjudication.

Conclusions: The issue of cancellation/surrender raised by RP at the appellate stage must be considered afresh by the adjudicating authority.

Issue 5: Scope and standard of claim verification by RP in CIRP

Relevant legal framework and precedents: The RP's duty is to verify claims based on corporate debtor's records and credible evidence. While RP must guard against forged claims, he must also not reject valid claims on technical grounds. Courts have emphasized fairness and thorough examination of evidence.

Court's interpretation and reasoning: The RP's approach of relying solely on CRM data and books of account, ignoring valid Buyers Agreements and payment receipts, was found to be inadequate. The Tribunal emphasized the need for detailed consideration of individual claims and documents.

Key evidence and findings: The appellants' claims were initially admitted based on submitted documents. RP's subsequent rejection without detailed examination was challenged.

Application of law to facts: The RP's verification must balance preventing fraudulent claims and recognizing legitimate creditors. A mechanical reliance on CRM data is impermissible.

Treatment of competing arguments: RP's concerns about forged documents are valid but must be addressed by detailed scrutiny, not wholesale rejection.

Conclusions: RP must verify claims comprehensively and fairly, considering all relevant evidence.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The rejection of all the applications filed by the appellant were only on the basis of decision taken by the adjudicating Authority rejecting I.A. No.5177/2022. It is not even proved that basis of I.A. No. 5177/2022 is same as those of the applications I.A.1377/2023 and other applications filed by the appellant."

"The RP in the reply 30.07.2024 filed in Comp. App. (AT) (Ins.) No. 130/2024 has now set up a case of cancellation/surrender of the units by the appellant, Vinod Khattar, which was not even before the adjudicating authority in the reply filed by the RP, which need consideration and findings by the adjudicating authority."

"In the facts of the present case, we are of the view that adjudicating authority was required to consider the applications filed by the appellant individually. Appellants application being based on individual facts of each case."

"We make it clear that we have not expressed any opinion on the merits of the claim of either of the parties and it is for the adjudicating authority to consider and take appropriate decision in accordance with the law."

Core principles established include:

• Each claim in CIRP must be considered on its own facts and merits, with due regard to contractual documents and payment evidence.
• RP's verification of claims cannot be confined to CRM data or internal records alone, especially when credible external documents are produced.
• New facts or contentions raised at appellate stage require remand to adjudicating authority for fair adjudication.
• Adjudicating authority must not mechanically reject claims by relying on prior orders concerning different claimants without individual consideration.

Final determinations:

• The impugned order rejecting the appellants' IAs solely based on I.A. 5177/2022 is set aside.
• The IAs filed by the appellants are revived and remanded to the adjudicating authority for fresh consideration.
• Both parties are permitted to file additional affidavits and replies regarding new facts, including cancellation/surrender claims.
• The adjudicating authority shall decide the claims afresh in accordance with law, without any prejudice to the rights of the parties.