ALOK KAUSHIK versus MRS BHUVANESHWARI RAMANATHAN AND OTHERS on 15 March 2021

ALOK KAUSHIK

v.

MRS BHUVANESHWARI RAMANATHAN AND OTHERS

(Civil Appeal No. 4065 of 2020)

MARCH 15, 2021

[DR. DHANANJAYA Y CHANDRACHUD AND

M. R. SHAH, JJ.]

Insolvency and Bankruptcy Code, 2016: s.60(5)(c) – Disputeregarding fee of valuer – Pursuant to the initiation of CIRP againstcorporate debtor, first respondent was appointed as the ResolutionProfessional (RP) – RP appointed appellant as a registered valuerof the Plant and Machinery of the corporate debtor of 115 sitesand a fee of Rs.7.50 lakhs and other expenses were ratified by theCommittee of Creditor (CoC) – Appellant claims to have conductedvaluation work of 84 sites and he paid for expenses of Rs.52,000 –NCLAT set aside the CIRP against the corporate debtor andremanded the matter to NCLT on the issue of CIRP costs – NCLTdecided on the fee of RP and reduced it by 20% from the fee ratifiedby CoC – In view of order of NCLAT, RP cancelled the appointmentof the appellant and requested appellant for waiver of fee – Inreturn, appellant agreed to reduce his fee by 25% along with theexpenses – However, RP informed appellant that the fee as ratifiedcannot be paid and paid a sum of Rs.50,000 – Appellant filedapplication under s.60(5) before the NCLT challenging non paymentof fees – However, the NCLT dismissed the application on the groundthat it had been rendered functus officio – NCLAT declined to exerciseits appellate jurisdiction – Hence the instant appeal – Held: Thoughthe CIRP was set aside later, the claim of the appellant related tothe period when he was discharging his functions as a registeredvaluer appointed as an incident of the CIRP – NCLT ought to haveexercised its jurisdiction under s.60(5)(c) of the IBC – In exerciseof jurisdiction under Art.142 of the Constitution, it is directed thatin a situation such as the present case, NCLT is sufficientlyempowered under s.60(5)(c) of the IBC to make a determination ofthe amount which is payable to an expert valuer as an intrinsic partof the CIRP costs – Regn.34 of the IRP Regulations defines‘insolvency resolution process cost’ to include the fees of other

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Aprofessionals appointed by the RP – Whether any work has beendone as claimed and if so, the nature of the work done by the valueris something which need not detain this Court, since it is purely afactual matter to be assessed by NCLT – The availability of agrievance redressal mechanism under the IBC against an insolvencyprofessional does not divest the NCLT of its jurisdiction underBs.60(5)(c) of the IBC to consider the amount payable to the appellant– In any event, the purpose of such a grievance redressal mechanismis to penalize errant conduct of the RP and not to determine theclaims of other professionals which form part of the CIRP costs –The impugned judgment and order of the NCLAT is set aside – TheCproceedings accordingly is remitted back to the NCLT fordetermining the claim of the appellant for the payment of theprofessional charges as a registered valuer appointed by the RP inpursuance of the initiation of the CIRP.

Allowing the appeal and remitting the matter to NCLT,Dthe Court

Conclusion

Allowing the appeal and remitting the matter to NCLT,Dthe Court HELD : 1.1 Where an application for withdrawal is filedunder Section 12A of the IBC, a provision has been made inRegulation 30A(7) in regard to the deposit of expenses.Regulation 30(A) would not apply specifically to the presentEsituation, since it deals with a case where an application iswithdrawn under Section 12A of the IBC. The appellant is justifiedin contending that there must be a forum within the ambit andpurview of the IBC which has the jurisdiction to make adetermination on a claim of the present nature, which has beeninstituted by a valuer who was appointed in pursuance of theFinitiation of the CIRP by the RP. After the NCLAT set aside theCIRP and remitted the proceedings to the NCLT to decide onthe CIRP costs, the NCLT held that it was rendered functus officioin relation to the appellant’s claim. This would be an incorrectreading of the jurisdiction of the NCLT as an AdjudicatingGAuthority under the IBC. [Paras 16, 18][528-G-H; 529-F-H]

1.2 Though the CIRP was set aside later, the claim of theappellant as registered valuer related to the period when he wasdischarging his functions as a registered valuer appointed as an incident of the CIRP. The NCLT would have been justified inexercising its jurisdiction under Section 60(5)(c) of the IBC. Inexercise of jurisdiction under Article 142 of the Constitution, itis directed that in a situation such as the present case, theAdjudicating Authority is sufficiently empowered under Section60(5)(c) of the IBC to make a determination of the amount whichis payable to an expert valuer as an intrinsic part of the CIRPcosts. Regulation 34 of the IRP Regulations defines ‘insolvencyresolution process cost’ to include the fees of other professionalsappointed by the RP. Whether any work has been done as claimedand if so, the nature of the work done by the valuer is somethingwhich need not detain this Court, since it is purely a factualmatter to be assessed by the Adjudicating Authority.[Para 19][530-D-G; 531-A]

Gujarat Urja Vikas Nigam Limited v. Amit Gupta andOthers 2021 SCC OnLine SC 194 – relied on.

2. The NCLT in its order while dismissing the applicationof the appellant for the payment of fees had observed that theInsolvency and Bankruptcy Board of India (‘IBBI’) is thecompetent authority to deal with allegations against the RPrelating to their failure to discharge statutory duties (paragraph7). Section 217 of the IBC empowers a person aggrieved by thefunctioning of an RP to file a complaint to the IBBI. If the IBBIbelieves on the receipt of the complaint that any RP hascontravened the provisions of IBC, or the rules, regulations ordirections issued by the IBBI, it can, under Section 218 of theIBC, direct an inspection or investigation. Under Section 220 ofthe IBC, IBBI can constitute a disciplinary committee to considerthe report submitted by the investigating authority. If thedisciplinary committee is satisfied that sufficient cause exists, itcan impose a penalty. The availability of a grievance redressalmechanism under the IBC against an insolvency professional doesnot divest the NCLT of its jurisdiction under Section 60(5)(c) ofthe IBC to consider the amount payable to the appellant. In anyevent, the purpose of such a grievance redressal mechanism isto penalize errant conduct of the RP and not to determine theclaims of other professionals which form part of the CIRP costs.[Para 20][531-A-E]

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A3. The impugned judgment and order of the NCLAT is setaside. The proceedings accordingly stood remitted back to theNCLT for determining the claim of the appellant for the paymentof the professional charges as a registered Valuer appointedby the RP in pursuance of the initiation of the CIRP. [Para 21][531-E-F]B

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4065of 2020.

From the Judgment and Order dated 21.03.2019 of the NationalCompany Law Tribunal in Company Appeal (AT) (I) No. 857 of 2020.

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Manish Paliwal, Vikas Kumar, M/S Corporate Legal Partners,Advs. for the appellant.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.D1. Admit.

2. The present appeal arises out of proceedings relating to theinsolvency of a company by the name of Kavveri Telecom InfrastructureLimited (“Corporate Debtor”). The National Company Law Tribunal,Bengaluru (“NCLT” or “Adjudicating Authority”) initiated theECorporate Insolvency Resolution Process (“CIRP”) against theCorporate Debtor by its order dated 21 March 2019. By an order dated26 August 2019, the first respondent was appointed as the ResolutionProfessional (“RP”).

3. By a letter dated 16 September 2019, the first respondentFappointed the appellant as a registered valuer of the Plant and Machineryof the Corporate Debtor, under Regulation 27 of the Insolvency andBankruptcy Board of India (Insolvency Resolution Process for CorporatePersons) Regulations, 2016 (“IRP Regulations”). The appellant wasappointed to value the plant and machinery at 115 sites of the CorporateDebtor across India. The appellant’s appointment fee (Rs 7.50 lakhsGplus applicable GST) and other expenses were ratified by the Committeeof Creditors (“CoC”), led by the second respondent, in its meeting heldon 9 December 2019.

4. The appellant claims to have conducted valuation work of overeighty-four sites and to have visited forty sites. Further, several outstationH

meetings were also stated to have been conducted between the appellantand the first respondent. The appellant has stated that he paid for expensesin the sum of Rs 52,000.

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5. The National Company Law Appellate Tribunal (“NCLAT” or“Appellate Authority”) set aside the initiation of CIRP against theCorporate Debtor by an order dated 18 December 2019. The NCLATremanded the matter back to the NCLT to decide on the issue of CIRPcosts. By an order dated 20 December 2019, the NCLT decided on thefee 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 19December 2019. In relation to the fee payable to the appellant, the firstrespondent requested him to consider a waiver. In return, the appellantagreed to reduce his fee by 25% from the fee ratified by the CoC, alongwith the expenses payable. However, on 2 March 2020, the firstrespondent informed the appellant that the fee as ratified could not bepaid, and paid a sum of Rs 50,000.

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7. The appellant then filed an application[1] under Section 60(5) ofthe Insolvency and Bankruptcy Code, 2016 (“IBC”) before the NCLTchallenging the non-payment of the fees. However, the NCLT dismissedthe application by an order dated 29 June 2020 concluding that it hadbeen rendered functus officio. In appeal, the NCLAT by an order dated13 October 2020 rejected the contention of the appellant, noting that anamount of Rs 50,000 had already been paid over. The appellant movedthis Court in an appeal under Section 62 of the IBC, for challenging theorder of the NCLAT.

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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 ofthe appellant submits that:

(i) The appellant was appointed as a Registered Valuer onG16 September 2019, and that his professional fees andother expenses in the amount of Rs 7.50 lakhs wereratified by the Committee of Creditors on 19 December2019; 1 CA No 192 of 2020

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A(ii)The NCLAT by its order dated 18 December 2019 setaside the corporate insolvency resolution process andthe proceedings were remitted to the NCLT to decideon the CIRP costs;

(iii) On 20 December 2019, the NCLT determined the feeswhich were payable to the Interim ResolutionProfessional; and B

(iv) However, despite the order of the NCLAT, nodetermination was made by the NCLT of the amountwhich was due and payable to the appellant for the workwhich was done as a Registered Valuer, recording thatCan amount of Rs 50,000 has been paid.

2. Issue notice, returnable in four weeks.

3. Dasti, in addition, is permitted.”

9. The Office Report indicates that all the respondents have been served. By an order dated 19 February 2021, fresh notice was directedDto be served on the Corporate Debtor, returnable in three weeks. Servicehas since been completed.

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

11. The submission of the appellant is that neither the NCLT northe NCLAT have applied their mind to the professional charges payableto him in his capacity as a registered valuer. According to the appellant,Fhe had completed the valuation of eighty-four sites and undertakenexpenses of Rs 52,000 in the valuation exercise. During the course ofthe hearing Mr Manish Paliwal, learned counsel appearing on behalf ofthe appellant, also submits that an amount of Rs 35,000 was paid towardsGST by the appellant. But the real issue which has been sought to becanvassed in the appeal is that in a situation such as present, where theGCIRP was set aside by the Appellate Authority, there has to be withinthe framework of the IBC, a modality for determining the claim of aprofessional valuer such as the appellant. The NCLT came to theconclusion that it was functus officio. The NCLAT declined to exerciseits appellate jurisdiction.

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ALOK KAUSHIK v. MRS BHUVANESHWARI RAMANATHANAND OTHERS [DR. DHANANJAYA Y CHANDRACHUD, J.]

12. The expression ‘insolvency resolution costs’ has been definedin Section 5(13) of the IBC in the following terms:

“(13) “insolvency resolution process costs” means–

(a) the amount of any interim finance and the costs incurredin raising such finance; B

(b) the fees payable to any person acting as a resolutionprofessional;

(c) any costs incurred by the resolution professional inrunning the business of the corporate debtor as a goingconcern;C

(d) any costs incurred at the expense of the Government tofacilitate the insolvency resolution process; and (e)any other costs as may be specified by the Board;”

13. Regulation 31 of the IRP Regulations is contained in Chapter9, which is titled ‘Insolvency Resolution Process Costs’. Regulation 31is in the following terms:

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“31. Insolvency resolution process costs.– “Insolvencyresolution process costs” under Section 5(13)(e) shall mean–

(a) amounts due to suppliers of essential goods and servicesunder Regulation 32; E

(aa) fee payable to authorized representative under sub-regulation (7) of regulation 16A; (ab)out of pocket expenses of authorized representative fordischarge of his functions under section 25A; F

(b) amounts due to a person whose rights are prejudiciallyaffected on account of the moratorium imposed undersection 14(1)(d);

(c) expenses incurred on or by the resolution professionalGto the extent ratified under regulation 33; (d)expenses incurred on or by the resolution professionalfixed under regulation 34; and (e)other costs directly relating to the corporate insolvencyresolution process and approved by the committee.”

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A14. Of the clauses of Regulation 31, of particular importance tothe present case is clause (c) which enunciates expenses incurred on orby the IRP to the extent ratified under Regulation 33. Clause (e) refersto other costs directly relating to the CIRP and approved by the CoC.Regulation 33 provides for the costs of the IRP:

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“33. Costs of the interim resolution professional.– (1) Theapplicant shall fix the expenses to be incurred on or by the interimresolution professional.

(2) The Adjudicating Authority shall fix expenses where theapplicant has not fixed expenses under sub-regulation (1).

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(3) The applicant shall bear the expenses which shall be reimbursedby the committee to the extent it ratifies.

(4) The amount of expenses ratified by the committee shall betreated as insolvency resolution process costs.

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Explanation.– For the purposes of this regulation, “expenses”include the fee to be paid to the interim resolution professional,fee to be paid to insolvency professional entity, if any and fee tobe paid to professionals, if any, and other expenses to be incurredby the interim resolution professional.”

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15 “Resolution professional costs” are defined in Regulation 34:

“34. Resolution professional costs.– The committee shall fixthe expenses to be incurred on or by the resolution professionaland the expenses shall constitute insolvency resolution processFcosts.

Explanation.– For the purposes of this regulation, “expenses”include the fee to be paid to the resolution professional, fee to bepaid to insolvency professional entity, if any, and fee to be paid toprofessionals, if any, and other expenses to be incurred by theGresolution professional.”

16. Where an application for withdrawal is filed under Section12A of the IBC, a provision has been made in Regulation 30A(7) inregard to the deposit of expenses. Regulation 30A(7) provides as follows:

H“30A. Withdrawal of application.

[…]

(7) Where the application is approved under sub-regulation (6),the applicant shall deposit an amount, towards the actual expensesincurred for the purposes referred to in clause (a) or clause (b) ofsub-regulation (2) till the date of approval by the AdjudicatingAuthority, as determined by the interim resolution professional orresolution professional, as the case may be, within three days ofsuch approval, in the bank account of the corporate debtor, failingwhich the bank guarantee received under sub-regulation (2) shallbe invoked, without prejudice to any other action permissibleagainst the applicant under the Code.”

17. Clause 2 of Regulation 30A, which is referred to in clause 7,is as follows:

“(2) The application under sub-regulation (1) shall be made inform-FA of the Schedule accompanied by a bank guarantee–

(a) towards estimated expenses incurred on or by the interimresolution professional for purposes of regulation 33, tillthe date of filing of the application under clause (a) ofsub-regulation (1); or (b)towards estimated expenses incurred for purposes ofclauses (aa), (ab), (c) and (d) of regulation 31, till thedate of filing of the application under clause (b) of sub-regulation (1).”

18. Regulation 30(A) would not apply specifically to the presentsituation, since it deals with a case where an application is withdrawnunder Section 12A of the IBC. The appellant is justified in contendingthat there must be a forum within the ambit and purview of the IBCwhich has the jurisdiction to make a determination on a claim of thepresent nature, which has been instituted by a valuer who was appointedin pursuance of the initiation of the CIRP by the RP. After the NCLATset aside the CIRP and remitted the proceedings to the NCLT to decideon the CIRP costs, the NCLT held that it was rendered functus officioin relation to the appellant’s claim. This, in our view, would be an incorrectreading of the jurisdiction of the NCLT as an Adjudicating Authorityunder the IBC. In a recent judgment in Gujarat Urja Vikas Nigam AB

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ALimited vs Amit Gupta and Others[2], this Court clarified the jurisdictionof the NCLT/NCLAT under Section 60(5)(c)[3] of the IBC in the followingterms:

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

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(emphasis supplied)

19. Though the CIRP was set aside later, the claim of the appellantas registered valuer related to the period when he was discharging hisfunctions as a registered valuer appointed as an incident of the CIRP.The NCLT would have been justified in exercising its jurisdiction underESection 60(5)(c) of the IBC and, in exercise of our jurisdiction underArticle 142 of the Constitution, we accordingly order and direct that in asituation such as the present case, the Adjudicating Authority issufficiently empowered under Section 60(5)(c) of the IBC to make adetermination of the amount which is payable to an expert valuer as anFintrinsic part of the CIRP costs. Regulation 34 of the IRP Regulationsdefines ‘insolvency resolution process cost’ to include the fees of otherprofessionals appointed by the RP. Whether any work has been done asclaimed and if so, the nature of the work done by the valuer is something 2 2021 SCC OnLine SC 194G3 “Section 60 (5) (c) – Adjudicating Authority for Corporate Persons: (5)Notwithstanding anything to the contrary contained in any other law for the time beingin force, the National Company Law Tribunal shall have jurisdiction to entertain ordispose of— ……

(c) any question of priorities or any question of law or facts, arising out of or in relationto the insolvency resolution or liquidation proceedings of the corporate debtor orHcorporate person under this Code.”

which need not detain this Court, since it is purely a factual matter to beassessed by the Adjudicating Authority.

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

21. We accordingly allow the appeal and set aside the impugnedjudgment and order of the NCLAT dated 13 October 2020. Theproceedings shall accordingly stand remitted back to the NCLT fordetermining the claim of the appellant for the payment of the professionalcharges as a registered Valuer appointed by the RP in pursuance of theinitiation of the CIRP. In order to facilitate a fresh determination by theNCLT, the order passed by the NCLT on 18 December 2019 is also setaside and CA No 192 of 2020 shall stand restored to the file of theNCLT for determination afresh in the light of the above observations.

22. Pending applications, if any, stand disposed of.

Devika Gujral

Appeal allowed.

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