NCLAT Delhi Upholds RP’s Rejection Of Legal Consultant’s Claim Over Absence Of Invoices In Corporate Debtor’s Records
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Rakesh Kumar Jain (Judicial Member), Justice Mohd Faiz Alam Khan (Judicial Member), and Mr. Naresh Salecha (Technical Member), has upheld the decision of the Resolution Professional (RP) rejecting a legal consultant’s claim, observing that in the absence of invoices or supporting documents in the corporate debtor’s records, the claim could not be accepted. The Appellate Tribunal held that the rejection of the claim by the RP could not be interfered with, as there was no documentary evidence substantiating the amount due or linking the services rendered to the corporate debtor specifically.
Background of the Case
The appeal arose from an order passed by the National Company Law Tribunal (NCLT), New Delhi, which had dismissed an Interlocutory Application filed by the appellant under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC). The appellant, a legal consultancy service provider, had challenged the RP’s decision to reject his claim for professional dues. The appellant submitted that he had been retained by the corporate debtor for legal services under an engagement letter dated 01.06.2016 and that he was also providing legal assistance to the group companies of the corporate debtor. It was further contended that even if the invoices were not reflected in the corporate debtor’s accounts, that could not be used to negate an otherwise genuine claim, as the absence of entries might be due to accounting omissions or tax-related reasons. The appellant also alleged that the RP failed to consider the contract and invoices while verifying the claim, and had instead relied solely on the absence of entries in the financial statements of the corporate debtor.
Respondent’s Submissions
The Resolution Professional opposed the appeal, arguing that the claim was unsupported by any verifiable evidence and that no corresponding entries existed in the corporate debtor’s accounts. It was also pointed out that the appellant had allegedly been allotted flats/inventories in certain real estate projects of the group companies in lieu of legal services rendered, and that the claim now raised was vague and inflated. The RP contended that the appellant’s services were not confined to the corporate debtor but extended to its group entities, and therefore, the alleged dues could not be attributed solely to the corporate debtor.
Tribunal’s Observations
The NCLAT noted that a careful perusal of the documents revealed that the appellant was providing legal consultancy services not only to the corporate debtor but also to its group companies. The Tribunal observed that the exact term of engagement was not specified in the letter of appointment, and the appellant had failed to establish that the services were rendered exclusively for the corporate debtor. The Bench remarked:“The RP could not verify the claim of the appellant in absence of accepted bills, credit balance and invoices in the corporate debtor’s records.” The Tribunal further noted that under Regulation 7 of the CIRP Regulations, 2016, while financial records are not the only means to establish a claim, they are prima facie evidence, and any claim unsupported by invoices or corroborative documents must be viewed with caution.
The Bench observed that the flats or inventories allegedly allotted to the appellant were not supported by any record showing which group entity made such allotments or whether they were in discharge of legal fees. The Tribunal noted: “There is no documentary evidence to show that the flats or inventories were provided to the appellant by which entity in the group or in discharge of which bill or service.” Referring to the lack of contemporaneous correspondence or demand for payment, the NCLAT added:“When the retainer ship fee of the appellant was due on the corporate debtor for many months, the natural corollary is that he should have demanded the same either by writing any email or letter etc. Non-demand of such dues also puts the claim of the appellant in the category of doubtful claim, more so in absence of commensurate material in the books of accounts of the corporate debtor.”
The NCLAT concluded that the claim was not substantiated by any credible material, and the RP had acted within his authority in rejecting it. The Bench found no reason to interfere with the NCLT’s decision or the RP’s assessment. Accordingly, the appeal was dismissed, and the order of the Adjudicating Authority was upheld, affirming that the rejection of the legal consultant’s claim based on absence of invoices and entries in the corporate debtor’s records was legally justified.
Appearance
For Appellant: Mr Mahjadeen, Advocate. Mr. Tanweeralam (Party in Person).
For Respondent: Mr Abhishek Anand & Ms Palak Kalra, for RP, Advocates
Cause Title: Juristical Legal Services Versus Three C Universal Developers Private Limited
Case No: Company Appeal (AT) (Insolvency) No. 1451 of 2023
Coram: Justice Rakesh Kumar Jain (Judicial Member), Justice Mohd Faiz Alam Khan (Judicial Member), Mr. Naresh Salecha (Technical Member)
