RP Cannot Revisit Or Re-Decide RERA's Findings While Verifying Claims: NCLT Allahabad

The National Company Law Tribunal (NCLT), Allahabad Bench, has held that a Resolution Professional has no power to re-litigate or sit in judgment over findings recorded by a real estate regulator while verifying claims during insolvency proceedings.

The tribunal ruled that where such findings are under challenge in appeal, the Resolution Professional is justified in treating the claim as “contingent” until the appellate authority finally decides the issue.

A coram of Judicial Member Praveen Gupta and Technical Member Ashish Verma observed, “the Resolution Professional does not possess adjudicatory powers under the Code to decide upon the disputed facts or to sit in judgment over the findings of the UP RERA."

Explaining the limited role of the Resolution Professional, the court added, “As per Section 18(1)(b) of the Code, the RP's duty is confined to collating and verifying claims based on the records and information available. The RP cannot substitute the role of a judicial authority in determining disputed liabilities or overriding existing statutory orders.”

The ruling came in insolvency proceedings against Raghupati Construction Private Limited, formerly known as Kalindi Construction Company Private Limited.

The applicants, led by Mukesh Kumar Goel and other homebuyers, had earlier approached the real estate regulator against a former director of the company, Shyam Sundar Yadav, claiming allotment of residential units and payments made towards the project.

In an order dated February 25, 2022, the real estate regulator held that the applicants did not qualify as “allottees” under the real estate law and found that the documents relied upon did not establish any financial liability of the corporate debtor.

That decision was challenged before the Uttar Pradesh Real Estate Appellate Tribunal (UP REAT), where the appeal remains pending.

While the appeal was pending, corporate insolvency proceedings against Raghupati Construction Private Limited were initiated on October 19, 2023. The homebuyers thereafter filed claims aggregating to about Rs 11 crore before the Resolution Professional.

Taking note of the subsisting RERA order and the pendency of the appeal before the UP REAT, the Resolution Professional classified the homebuyers' claims as “contingent claims”.

The homebuyers challenged this classification before the NCLT, arguing that the Resolution Professional had acted contrary to Regulation 8A of the CIRP Regulations and that their claims ought to have been admitted as financial debt.

Opposing the plea, the Resolution Professional pointed out that there was no stay on the RERA order. It was submitted that, in the absence of any interim relief from the appellate tribunal, the RERA findings continued to be legally binding for the purpose of verification of claims.

The Resolution Professional also told the tribunal that there were no corresponding entries in the books of account of Raghupati Construction Private Limited to support the alleged cash payments claimed to have been made to the former director.

Agreeing with the Resolution Professional, the NCLT observed that since the RERA order remains effective and its appeal is still sub judice, the existence and enforceability of the claimed debt remain uncertain.

"Since the said order remains effective and its appeal is sub judice before the UP REAT, the existence and enforceability of the claimed debt remain uncertain, thereby creating a situation of contingency with respect to the Applicants' alleged financial relationship with the Corporate Debtor", the tribunal said

The bench further held that the Resolution Professional cannot decide disputed facts or reassess the correctness of statutory orders passed by other competent authorities.

It also noted that the outcome of the pending appeal before the UP REAT would determine whether the applicants qualify as financial creditors under the insolvency law. Until such determination, the tribunal held, the classification of their claims as contingent cannot be termed arbitrary, perverse, or contrary to law.

Dismissing the application, the NCLT upheld the Resolution Professional's classification of the homebuyers' Rs 11 crore claims as contingent in the insolvency proceedings of Raghupati Construction Private Limited

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