2021 (3) TMI 1242 - SC - Insolvency and Bankruptcy

Supreme Court sets aside NCLAT's order on professional charges in insolvency case

Alok Kaushik Versus Bhuvaneshwari Ramanathan and Ors.

The Supreme Court allowed the appeal, setting aside the NCLAT's order and remitting the matter back to the NCLT to determine the Appellant's claim for ... Costs, charges, expenses and professional fees payable to a registered valuer appointed after the initiation of the CIRP under the IBC - 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 - HELD THAT:- 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 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. 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 - Appeal allowed. Issues Involved:1. Appointment and fees of the registered valuer.2. Jurisdiction of NCLT and NCLAT regarding CIRP costs.3. Determination of insolvency resolution process costs.4. Application of Section 60(5)(c) of the IBC.5. Role of IBBI in grievance redressal against RP.Detailed Analysis:1. Appointment and Fees of the Registered Valuer:The appeal arises from the insolvency proceedings of Kavveri Telecom Infrastructure Limited. The NCLT initiated the CIRP against the Corporate Debtor on 21 March 2019, and the first Respondent was appointed as the RP on 26 August 2019. The Appellant was appointed as a registered valuer for the Corporate Debtor's plant and machinery on 16 September 2019, with a fee of Rs. 7.50 lakhs plus GST ratified by the CoC on 9 December 2019. The Appellant claims to have conducted valuations at eighty-four sites and incurred expenses of Rs. 52,000. However, following the NCLAT's order on 18 December 2019 setting aside the CIRP, the first Respondent cancelled the Appellant's appointment and paid only Rs. 50,000, leading to the Appellant filing an application under Section 60(5) of the IBC for nonpayment of fees.2. Jurisdiction of NCLT and NCLAT Regarding CIRP Costs:The NCLAT remanded the matter to the NCLT to decide on CIRP costs. The NCLT reduced the RP's fee by 20% but did not address the Appellant's fees, claiming it was functus officio. The NCLAT upheld this decision, leading to the Appellant's appeal to the Supreme Court.3. Determination of Insolvency Resolution Process Costs:The Supreme Court examined the definitions and regulations concerning insolvency resolution process costs under Section 5(13) of the IBC and Regulation 31 of the IRP Regulations. These include fees for resolution professionals and other costs approved by the CoC. The Court emphasized that the costs incurred by professionals like the Appellant, ratified by the CoC, should be considered part of the insolvency resolution process costs.4. Application of Section 60(5)(c) of the IBC:The Supreme Court highlighted that Section 60(5)(c) of the IBC grants the NCLT jurisdiction to entertain or dispose of any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings. The Court noted that the NCLT should have exercised its jurisdiction to determine the Appellant's claim, as it related to the period when the Appellant was discharging his duties as a registered valuer during the CIRP.5. Role of IBBI in Grievance Redressal Against RP:The NCLT had suggested that the IBBI was the competent authority to address allegations against the RP. However, the Supreme Court clarified that while the IBBI can investigate and penalize errant conduct of the RP, it does not divest the NCLT of its jurisdiction to determine claims related to CIRP costs. The grievance redressal mechanism is meant to address misconduct, not to settle claims for professional fees.Conclusion:The Supreme Court allowed the appeal, set aside the NCLAT's order, and remitted the matter back to the NCLT to determine the Appellant's claim for professional charges. The NCLT's order of 18 December 2019 was also set aside, and the application CA No. 192 of 2020 was restored for fresh determination. Pending applications were disposed of.