NCLT Must Pass Reasonable Order For Fees & Expenses Of Resolution Professional : Supreme Court

Background of the Matter

The Appellant in the case had been appointed as the Interim Resolution Professional by an order of NCLT. The order of NCLT was set aside in appeal by NCLAT and proceedings were remitted to NCLT to decide upon the fees and costs incurred by the Appellant to be borne by the Respondent (the Financial Creditor). The appellant addressed a letter to the respondent claiming an amount of Rs.14,75,660 as the amount payable as fees and costs of which an amount of Rs 5,66,667 was reimbursed by the respondent leaving in balance an amount of Rs 9,08,993. The appellant moved to NLCT to obtain the release of the remaining fees and costs.

By its order dated 7/02/2020, NCLT directed the Respondent Bank to pay Rs.5,00,000 plus GST towards the fee of the Appellant. In appeal, by way of the impugned order and judgement, NCLAT dismissed the appeal observing that "The expenses had been allowed in full and the consolidated amount of Rs 5,00,000 plus GST allowed as fee of the RP for the entire period was not unreasonable."

Adv Anjali Sharma for the Appellant submitted before the Supreme Court that the statement of fee and expenses submitted by the appellant was in terms of the technical and financial bid. She further submitted that neither the NCLT nor NCLAT conducted any scrutiny of the factual position and merely awarded an ad hoc figure of Rs 5,00,000. This shows, it was argued, that there has been no application of mind by the adjudicating authorities to the basis of the claim and the figures which were accepted by the financial creditor.

The judgement authored by Justice D Y Chandrachud notes that, as was held by the Supreme Court in Alok Kaushik v Bhuvaneshwari Ramanathan (2021) 5 SCC 787, though the CIRP has been set aside the NCLT as an adjudicating authority is sufficiently empowered under Section 60(5)(c) of the IBC to make a determination of the amount which is payable to an expert valuer as an intrinsic part of the CIRP costs.

The Court further makes note of the fact that the appellant had addressed a letter to the respondent on 13 December 2019 prior to the filing of the application to which the respondent responded on 24 January 2020 stating that, upon verification, the costs and fees were found in conformity with both the technical and financial bid, based on which the assignment was awarded. It also notes that in the application which was filed by the appellant before the NCLT, the appellant annexed a statement of costs, the amount which was reimbursed with the balance dues at Annexure 'D'. Noting that despite the respondent verifying that the costs and fees claimed by the appellant are in conformity with the technical and financial bid, the order of the NCLT has not considered the submission of the appellant.

"The order of the NCLT, however, reveals that none of the submissions of the appellant have been considered. The adjudicating authority merely directed the respondent to pay the expenses incurred and an amount of Rs 5,00,000 plus GST towards the fee of the RP. Neither the basis of the claim nor its reasonableness has been considered by the adjudicating authority. The appellate authority has merely proceeded in an ad hoc manner on the ground that the amount of Rs 5,00,000 as fee, in addition to the expenses, appears to be reasonable. Both the orders suffer from an abdication in the exercise of jurisdiction. In the absence of any reasons either in the order of the NCLT or the appellate authority, it is impossible for the Court to deduce the basis on which the payment of an amount of Rs 5,00,000 together with expenses has been found to be reasonable. Consequently, an order of remand becomes necessary." (Para 16)

Accordingly, noting that both orders "suffer from an abdication in the exercise of jurisdiction", the Court set aside the impugned judgement and order of the NCLAT and the order of the NLCT dated 7 February, 2020 remanded it back to NCLT for fresh consideration of the matter.

Case Title: Devarajan Raman v Bank of India Limited

Coram: Justices D.Y.Chandrachud, A.S.Bopanna

Citation : 2022 LiveLaw (SC) 24

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