SC: None of the submissions of the appellant have been considered, neither the basis of the claim nor its reasonableness has been considered by the Adjudicating Authority

 

The Division Bench of the Supreme Court consisting of Justices D.Y. Chandrachud and A.S. Bopanna set aside the order of the NCLAT and NCLT as the impugned revealed that none of the submissions of the appellant were considered and that neither the basis of the claim of Rs 5,00,000 plus GST towards the fee of the RP nor its reasonableness was considered by the adjudicating authority.

Facts

The issue in dispute relates to the payments of costs and expenses incurred by the Resolution Professional. Pursuant to an email of the respondent, who was a financial creditor of Poonam Drums and Containers Private Limited (the Corporate Debtor), the appellant submitted his technical and financial bid on 5 February 2019 for appointment as an Interim Resolution Professional. On 8 March 2019, the respondent filed a petition under Section 7 of the Insolvency and Bankruptcy Code 2016 against the Corporate Debtor. On 20 September 2019, the Corporate Debtor was admitted to the insolvency resolution process by the National Company Law Tribunal and the appellant was appointed as an Interim Resolution Professional.

Procedural History

The order of the NCLT was set aside in appeal by the NCLAT at the behest of the Directors of the Corporate Debtor. By the order of the appellate authority, the proceedings were remitted to the NCLT to decide upon the fee and costs of the Corporate Insolvency Resolution Process incurred by the appellant which was to be borne by the respondent as a financial creditor. The appellant addressed a letter to the respondent enclosing a statement showing the amount payable as fee and costs. The amount was quantified in the amount of Rs 14,75,660 until 19 December 2019. An amount of Rs 5,66,667 was reimbursed by the respondent leaving in balance, according to the appellant, an amount of Rs 9,08,993. The appellant moved the NCLT in an application on 17 January 2020 for obtaining the release of the remaining fee and costs.The respondent replied to the appellant’s letter stating that it had verified the details of the fee and costs stated by the appellant and found them in conformity with the technical and financial bid based on which he had been awarded the assignment, together with the approval of the Committee of Creditors. The respondent stated that it would release the payment to the appellant, upon receipt of an order of the NCLT. By its order, the NCLT disposed of the application. The appellant filed an appeal before the NCLAT, which was dismissed by it. 

 

Contentions Made

Appellant: counsel submitted that in terms of the decision of this Court in Alok Kaushik vs Bhuvaneshwari Ramanathan, the adjudicating authority would have jurisdiction u/s 60(5)(c) of IBC. In the present case, the jurisdiction has (it is urged) been improperly exercised in the sense that there has been no application of mind to the basis of the claim and the figures which were accepted by the financial creditor. The appellant did not challenge the order of the NCLAT remitting the proceedings back to the NCLT for determination of the costs and fee because it was not necessary for the appellant to do so. The real grievance of the appellant is that the claim has not been assessed or analyzed in terms of what was agreed, when the appellant submitted his bid or in terms of the circular of the Insolvency and Bankruptcy Board of India.

Respondent: counsel submitted that the appellant accepted the order of the NCLAT remitting the proceedings back to the NCLT for determining the costs and fee payable to the RP. Moreover, it was sought to be urged that the payment which has been made to the RP is commensurate with the work which was done over a period of three months. 

 

 

Observations of the Court and Judgment

The bench observed that:

“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.”

Hence it was held that:

“We accordingly allow the appeal and set aside the impugned judgment and order of the NCLAT dated 30 July 2020. Similarly, the order of NCLT dated 7 February 2020 is set aside. MA No 223/2020 in CP (IB) 970/MB/2019 is restored to the file of the NCLT for a decision afresh. The NCLT, upon remand, is requested to expedite the disposal of the MA and to complete the process within a period of one month from the date of receipt of a certified copy of this order on its record.”

Case Name: Devarajan Raman vs Bank of India Limited

Citation: Civil Appeal No 3160 of 2020

Bench: Justice D.Y. Chandrachud, Justice A.S. Bopanna

Decided on: 5^th January 2022 

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