The National Company Law Tribunal Delhi on 13th July 2021 issued notice in an application bringing to fore a substantial question of law raised concerning whether a Resolution Professional is bound by the principles of Natural Justice while rejecting claims of a creditor.
A division bench consisting of Justice Bhaskara Pantula Mohan, Acting President of NCLT Delhi and Justice Hemant Kumar Sarangi in Edelweiss Asset Reconstruction Company v. CLC Industries Ltd issued notice directing the matter to be listed on 2nd August 2021. The importance of this case can be judged by the fact that there has been no direct judicial determination on this question of law so far.
Counsel for M/s Snehal Agency, an operational creditor to CLC Industries, Mr. Aditya Manubarwala along with Mr. Maulik Chokshi contended that per the ratio laid by the Supreme Court of India in Swiss Ribbons, a Resolution Professional performs an administrative role not a quasi-judicial role; administrative authorities are bound by principles of Natural Justice. Furnishing reasons for an order causing prejudice to a creditor and the right to be heard is an intrinsic part and parcel of the principle of Natural Justice, thus making the Resolution Professional bound to furnish reasons for rejecting claims of an operational creditor. Furthermore, they contended that in Navneet Kumar v. Bharat Heavy Engineering Electricals Ltd the National Company Law Appellate Tribunal held that a Resolution Professional cannot reject claims without taking evidence substantiating claims into account.
In view of the above, rejection by the Resolution Professional of the Operational Creditors’ Claims without affording a chance to furnishing evidence to substantiate claims is violation of the principles of Natural Justice and thus an illegal act by the Resolution Professional, they contended.
The aforementioned case was filed by Ms. Nistha Gupta on behalf of A Bharat & Co, Solicitors and AOR and Ms. Pooja Sharma.
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