Alok Kaushik Vs Mrs. Bhuvaneshwari Ramanathan and Others - Fees of a Professional & dispute resolution U/s 60(5)(c) of the IBC.

Supreme Court (15.03.2021) in Alok Kaushik Vs  Mrs. Bhuvaneshwari Ramanathan and Others  [Civil Appeal No 4065 of 2020] held that;

• 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. Regulation 34 of the IRP Regulations defines ‘insolvency resolution process cost’ to include the fees of other professionals appointed by the RP. Whether any work has been done as claimed and if so, the nature of the work done by the valuer is something which need not detain this Court, since it is purely a factual matter to be assessed by the Adjudicating Authority.

• The availability of a grievance redressal mechanism under the IBC against an insolvency professional does not divest the NCLT of its jurisdiction under Section 60(5)(c) of the IBC to consider the amount payable to the appellant. In any event, the purpose of such a grievance redressal mechanism is to penalize errant conduct of the RP and not to determine the claims of other professionals which form part of the CIRP costs.

Excerpts of the order;

# 2 The present appeal arises out of proceedings relating to the insolvency of a company by the name of Kavveri Telecom Infrastructure Limited (“Corporate Debtor”). The National Company Law Tribunal, Bengaluru (“NCLT” or “Adjudicating Authority”) initiated the Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor by its order dated 21 March 2019. By an order dated 26 August 2019, the first respondent was appointed as the Resolution Professional (“RP”).

 

# 3 By a letter dated 16 September 2019, the first respondent appointed the appellant as a registered valuer of the Plant and Machinery of the Corporate Debtor, under Regulation 27 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“IRP Regulations”). The appellant was appointed to value the plant and machinery at 115 sites of the Corporate Debtor across India. The appellant’s appointment fee (Rs 7.50 lakhs plus applicable GST) and other expenses were ratified by the Committee of Creditors (“CoC”), led by the second respondent, in its meeting held on 9 December 2019.

 

# 4 The appellant claims to have conducted valuation work of over eighty-four sites and to have visited forty sites. Further, several outstation meetings were also stated to have been conducted between the appellant and the first respondent. The appellant has stated that he paid for expenses in the sum of Rs 52,000.

 

# 5 The National Company Law Appellate Tribunal (“NCLAT” or “Appellate Authority”) set aside the initiation of CIRP against the Corporate Debtor by an order dated 18 December 2019. The NCLAT remanded the matter back to the NCLT to decide on the issue of CIRP costs. By an order dated 20 December 2019, the NCLT decided on the fee of the RP and reduced it by 20% from the fee ratified by the CoC.

 

# 6 In view of the order dated 18 December 2019 of the NCLAT, the first respondent cancelled the appointment of the appellant on 19 December 2019. In relation to the fee payable to the appellant, the first respondent requested him to consider a waiver. In return, the appellant agreed to reduce his fee by 25% from the fee ratified by the CoC, along with the expenses payable. However, on 2 March 2020, the first respondent informed the appellant that the fee as ratified could not be paid, and paid a sum of Rs 50,000.

 

# 7 The appellant then filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) before the NCLT challenging the non-payment of the fees. However, the NCLT dismissed the application by an order dated 29 June 2020 concluding that it had been rendered functus officio. In appeal, the NCLAT by an order dated 13 October 2020 rejected the contention of the appellant, noting that an amount of Rs 50,000 had already been paid over. The appellant moved this Court in an appeal under Section 62 of the IBC, for challenging the order of the NCLAT.

 

# 8 On 11 January 2021, this Court issued notice in the appeal and, while doing so, passed the following order:

• “1 Mr Manish Paliwal, learned counsel appearing on behalf of the appellant submits that:

• (i) The appellant was appointed as a Registered Valuer on 16 September 2019, and that his professional fees and other expenses in the amount of Rs 7.50 lakhs were ratified by the Committee of Creditors on 19 December 2019;

• (ii) The NCLAT by its order dated 18 December 2019 set aside the corporate insolvency resolution process and the proceedings were remitted to the NCLT to decide on the CIRP costs;

• (iii) On 20 December 2019, the NCLT determined the fees which were payable to the Interim Resolution Professional; and

• (iv) However, despite the order of the NCLAT, no determination was made by the NCLT of the amount which was due and payable to the appellant for the work which was done as a Registered Valuer, recording that an amount of Rs 50,000 has been paid.

• 2 Issue notice, returnable in four weeks.

• 3 Dasti, in addition, is permitted.”

 

# 10 The issue in the present appeal relates to the costs, charges, expenses and professional fees payable to a registered valuer appointed after the initiation of the CIRP under the IBC, in a situation where the CIRP is eventually set aside by the Adjudicating Authority or, as the case may be, Appellate Authority.

 

# 11 The submission of the appellant is that neither the NCLT nor the NCLAT have applied their mind to the professional charges payable to him in his capacity as a registered valuer. According to the appellant, he had completed the valuation of eighty-four sites and undertaken expenses of Rs 52,000 in the valuation exercise. During the course of the hearing Mr Manish Paliwal, learned counsel appearing on behalf of the appellant, also submits that an amount of Rs 35,000 was paid towards GST by the appellant. But the real issue which has been sought to be canvassed in the appeal is that in a situation such as present, where the CIRP was set aside by the Appellate Authority, there has to be within the framework of the IBC, a modality for determining the claim of a professional valuer such as the appellant. The NCLT came to the conclusion that it was functus officio. The NCLAT declined to exercise its appellate jurisdiction.

 

# 18 Regulation 30(A) would not apply specifically to the present situation, since it deals with a case where an application is withdrawn under Section 12A of the IBC. The appellant is justified in contending that there must be a forum within the ambit and purview of the IBC which has the jurisdiction to make a determination on a claim of the present nature, which has been instituted by a valuer who was appointed in pursuance of the initiation of the CIRP by the RP. After the NCLAT set aside the CIRP and remitted the proceedings to the NCLT to decide on the CIRP costs, the NCLT held that it was rendered functus officio in relation to the appellant’s claim. This, in our view, would be an incorrect reading of the jurisdiction of the NCLT as an Adjudicating Authority under the IBC. In a recent judgment in Gujarat Urja Vikas Nigam Limited vs Amit Gupta and Others, this Court clarified the jurisdiction of the NCLT/NCLAT under Section 60(5)(c)3 of the IBC in the following terms:

• “71. The institutional framework under the IBC contemplated the establishment of a single forum to deal with matters of insolvency, which were distributed earlier across multiple fora…Therefore, considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. However, in doing do, we issue a note of caution to the NCLT and NCLAT to ensure that they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor. The nexus with the insolvency of the Corporate Debtor must exist.” 

(emphasis supplied)

 

# 19 Though the CIRP was set aside later, the claim of the appellant as registered valuer related to the period when he was discharging his functions as a registered valuer appointed as an incident of the CIRP. The NCLT would have been justified in exercising its jurisdiction under Section 60(5)(c) of the IBC and, in exercise of our jurisdiction under Article 142 of the Constitution, we accordingly order and direct that in a situation such as the present case, the 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. Regulation 34 of the IRP Regulations defines ‘insolvency resolution process cost’ to include the fees of other professionals appointed by the RP. Whether any work has been done as claimed and if so, the nature of the work done by the valuer is something which need not detain this Court, since it is purely a factual matter to be assessed by the Adjudicating Authority.

 

# 20 The NCLT in its order dated 29 June 2020, while dismissing the application of the appellant for the payment of fees, observed that the Insolvency and Bankruptcy Board of India (“IBBI”) is the competent authority to deal with allegations against the RP relating to their failure to discharge statutory duties (paragraph 7). Section 217 of the IBC empowers a person aggrieved by the functioning of an RP to file a complaint to the IBBI. If the IBBI believes on the receipt of the complaint that any RP has contravened the provisions of IBC, or the rules, regulations or directions issued by the IBBI, it can, under Section 218 of the IBC, direct an inspection or investigation. Under Section 220 of the IBC, IBBI can constitute a disciplinary committee to consider the report submitted by the investigating authority. If the disciplinary committee is satisfied that sufficient cause exists, it can impose a penalty. The availability of a grievance redressal mechanism under the IBC against an insolvency professional does not divest the NCLT of its jurisdiction under Section 60(5)(c) of the IBC to consider the amount payable to the appellant. In any event, the purpose of such a grievance redressal mechanism is to penalize errant conduct of the RP and not to determine the claims of other professionals which form part of the CIRP costs.

 

# 21 We accordingly allow the appeal and set aside the impugned judgment and order of the NCLAT dated 13 October 2020. The proceedings shall accordingly stand remitted back to the NCLT for determining the claim of the appellant for the payment of the professional charges as a registered Valuer appointed by the RP in pursuance of the initiation of the CIRP. In order to facilitate a fresh determination by the NCLT, the order passed by the NCLT on 18 December 2019 is also set aside and CA No 192 of 2020 shall stand restored to the file of the NCLT for determination afresh in the light of the above observations.

 

-------------------------------------------------------------