RP isn’t Precluded from Reporting on Limitation, NCLT Didn’t Commit Any Error in Appointing RP | NCLAT

Case Details: CL Sharma v. Bank of Maharashtra - [2024] 160 taxmann.com 250 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
  • Abhjijeet Sinha, Sr. Advocate, Akash Chatterjee, Ms Priyadarshini Dewan & Ms Shankari Mishra, Advocates for the Appellant.
  • Namit Suri, Advocate, Ravi, CS, Raman Tomar, Aman Varma & Ms Riya Wasade, Advocates for the Respondent.

Facts of the Case

In the instant case, Respondent No. 1 (i.e. the financial creditor) extended a loan facility to the corporate debtor. In pursuance of the said loan, the appellant stood as a personal guarantor. However, the corporate debtor defaulted in making repayment of the loan amount and respondent No. 1 filed an application u/s 95 of the IBC before the NCLT against the appellant.

The Adjudicating Authority (NCLT) vide the impugned order admitted the said application and directed the RP to submit a report and the matter was directed to be listed on 23.02.2024. Thereafter, the appellant made an appeal before the NCLAT against the order passed by the NCLT.

The appellant contended that the account of the corporate debtor was declared NPA on 27.07.2016 and the application was filed only on 16.03.2023. Thus, the application was barred by time and the NCLT committed an error in appointing an RP in the said application.

The NCLAT observed that when the right had been given to the personal guarantor to submit its objection or explanation or information, it is open for the personal guarantor to give all necessary information and objection to the report of RP.

Further, the NCLAT observed that the report which needs to be submitted by RP u/s 99 is a report confining to procedural requirements on an application u/s 95. The RP is not supposed to submit any report regarding the question of limitation since the report u/s 99 confines to an examination as to whether an application fulfils the requirements of sections 94 and 95 and that the applicant has provided the information and given the explanation sought by the RP.

The NCLAT also referred to the judgement given by the Supreme Court in Diliip B Jiwrjka case, where the Court held that RP does not perform any adjudicatory function, nor even can take an administrative decision. The role of RP has been held to be only a facilitator.

NCLAT Held

The NCLAT held that it is always open for the appellant to take pleas as permissible at the time of adjudication of issue, including any defect in the application u/s 95 of the IBC and the said question also does not require any consideration at the stage when RP is appointed.

Therefore, the claim of the appellant that the application was time-barred and it should have been decided at the time when the NCLT-appointed RP could not be accepted. Therefore, the NCLT did not commit any error in appointing the RP.

List of Cases Reviewed

• • Bank of Maharashtra v. C.L. Sharma [2024] 160 taxmann.com 249 (NCLT-New Delhi ) [Para ] – affirmed [See Annex].