Case Note & Summary
The appeal arose from a judgment of the National Company Law Appellate Tribunal dated 30 July 2020, concerning the payment of costs and expenses incurred by the Resolution Professional in the Corporate Insolvency Resolution Process of Poonam Drums and Containers Private Limited. The appellant, appointed as Interim Resolution Professional, claimed fees and costs quantified at Rs 14,75,660, of which Rs 5,66,667 was reimbursed, leaving a balance of Rs 9,08,993. The NCLT, in its order dated 7 February 2020, directed the respondent financial creditor to pay all expenses and Rs 5,00,000 plus GST as fee, which was upheld by the NCLAT. The core legal issues involved the jurisdiction of the adjudicating authority under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 to determine insolvency resolution process costs, and whether the orders were reasoned and based on proper consideration of the facts. The appellant argued that the fee claim was in accordance with the technical and financial bid, ratified by the Committee of Creditors, and verified by the respondent, but the NCLT and NCLAT failed to consider these submissions and awarded an ad hoc amount without reasons. The respondent contended that the fee was commensurate with the work done over three months. The Supreme Court, referencing Alok Kaushik v Bhuvaneshwari Ramanathan, affirmed that the adjudicating authority has jurisdiction under Section 60(5)(c) to determine such costs. It found that both lower authorities abdicated their jurisdiction by not analyzing the claim's basis or reasonableness, and their orders lacked reasoning. Consequently, the Court remanded the matter to the NCLT for a fresh determination with proper consideration of the appellant's submissions and the applicable regulations, including Regulation 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Headnote
A) Insolvency Law - Resolution Professional Fees - Jurisdiction of Adjudicating Authority - Insolvency and Bankruptcy Code, 2016, Section 60(5)(c) - The Supreme Court held that the adjudicating authority (NCLT) has jurisdiction under Section 60(5)(c) of the IBC to determine the amount payable to a resolution professional as part of insolvency resolution process costs, even after the CIRP is set aside, as established in Alok Kaushik v Bhuvaneshwari Ramanathan. The Court found that both NCLT and NCLAT failed to properly exercise this jurisdiction by not considering the basis of the claim or its reasonableness, leading to an order of remand for fresh determination. (Paras 13-16) B) Insolvency Law - Resolution Professional Fees - Reasonableness and Determination - Insolvency and Bankruptcy Code, 2016, and Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Regulation 34 - The Court emphasized that fixation of fees is not merely a business decision of the Committee of Creditors but requires judicial scrutiny. It noted that the NCLT's order directing payment of Rs 5,00,000 plus GST as fee, without considering the appellant's submissions or the agreement with the financial creditor, and the NCLAT's affirmation on ad hoc grounds, constituted an abdication of jurisdiction. The Court remanded the matter for a reasoned determination based on the claim's basis and reasonableness. (Paras 8-16)
Issue of Consideration
Whether the NCLT and NCLAT properly exercised jurisdiction in determining the fees and costs payable to the Resolution Professional under the Insolvency and Bankruptcy Code, 2016, and whether their orders were reasoned and based on proper consideration of the facts and agreements.
Final Decision
Supreme Court set aside the orders of NCLT and NCLAT and remanded the matter to NCLT for fresh determination of the fees and costs payable to the appellant, with directions to consider the basis of the claim and its reasonableness.
Law Points
- Jurisdiction of adjudicating authority under Section 60(5)(c) of Insolvency and Bankruptcy Code
- 2016 to determine insolvency resolution process costs
- Reasonableness of fees and expenses of resolution professional
- Requirement of reasoned orders in judicial proceedings
- Application of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations
- 2016
