Supreme Court allows the appeal, holds that NCLT, have to consider the basis and reasonableness of claim for fee and expenses payable to Resolution Professional, and cannot pass ad hoc orders
In the instant case titled Devarajan Raman Vs. Bank of India Limited the issue that was raised before the Supreme court was:
Whether the fees payable to Resolution Professionals by the Committees of Creditors that appoint them/confirm their appointment and the extent to which and the manner in which the same is justiciable?
The Apex Court was of the view that after the NCLAT set aside the order of the AA initiating the CIRP, the proceedings were remitted back for determining the insolvency resolution costs. The Court materially noted that the appellant had addressed a letter to the respondent prior to the filing of the application to which the respondent, upon verification, had stated that the costs and fees were in conformity with both the technical and financial bid, based on which the assignment was awarded. Further, in the application, which was filed by the appellant before the AA, the appellant annexed a statement of costs, the amount, which was reimbursed with the balance dues, however, the order of the AA reveals that none of the submissions of the appellant was considered.
The AA 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 was considered by the AA. Further, the NCLAT merely proceeded in an ad hoc manner on the ground that the amount of Rs 5,00,000 as a fee, in addition to the expenses, appears to be reasonable. The Apex Court stated that both the orders suffer from an abdication in the exercise of jurisdiction and in the absence of any reasons in both the order, it is impossible 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 and order of remand becomes necessary.
The court categorically held that:
“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.
We accordingly allow the appeal and set aside the impugned judgment and order of the NCLAT dated 30 July 2020. Similarly, the order of the 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”.
Hence, With the passing of this judgment, the Adjudicating Authority exercising jurisdiction under Section 60 (5) (c) of the IBC shall have to take into account, the fee and expenses fixed by the Committee of Creditors as payable to the Resolution Professional, and may not pass ad hoc unreasoned orders