Appeal dismissed, success fee disallowed, distribution among creditors ordered.

The appeal was dismissed, upholding the Adjudicating Authority's decision to disallow the success fee for the Resolution Professional. The judgment emphasized that the success fee was not permissible under the IBC provisions and regulations. The Adjudicating Authority's jurisdiction to review the reasonableness of fees was affirmed, and it directed the distribution of the success fee amount among employees, underpaid operational creditors, and unsecured creditors of the corporate debtor.

---

---

Issues Involved:
1. Legality of the success fee for the Resolution Professional (RP).
2. Whether the success fee is within the commercial wisdom of the Committee of Creditors (CoC).
3. Reasonableness and justiciability of the success fee.
4. Adjudicating Authority's jurisdiction to interfere with the CoC's decision on the success fee.

Issue-wise Detailed Analysis:

1. Legality of the Success Fee for the Resolution Professional (RP):
The Appellant contended that the success fee was permissible under Circular No. IBBI/IP/013/2018 dated 12th June 2018. However, the Adjudicating Authority disagreed, stating that the success fee was not part of the commercial wisdom of the CoC and was unreasonable. The Circular emphasized that fees should be reasonable, directly related to and necessary for the CIRP, and determined on an arm's length basis. The Circular did not expressly provide for success fees, and the term "success fee" was only mentioned illustratively in Annexure-B, which was not binding.

2. Whether the Success Fee is within the Commercial Wisdom of the Committee of Creditors (CoC):
The Appellant argued that the approval of the success fee was a commercial decision of the CoC and should not be interfered with by the Adjudicating Authority. However, the Adjudicating Authority and the Amicus Curiae emphasized that the quantum of fees is justiciable and must be reasonable. The Adjudicating Authority noted that the success fee was introduced at the last moment and was not transparent. The judgment cited by the Adjudicating Authority, "Mr. Devarajan Raman, Resolution Professional Poonam Drum & Containers Pvt. Ltd. v. Bank of India Ltd.," supported the view that fixation of fees is not a business decision depending upon the commercial wisdom of the CoC.

3. Reasonableness and Justiciability of the Success Fee:
The Adjudicating Authority found the success fee of Rs. 3 Crores unreasonable and an afterthought, as it was only claimed in the last CoC meeting. The Circular dated 12.06.2018 and the IBBI Discussion Paper emphasized that fees must be reasonable and transparent. The Amicus Curiae argued that the absence of a regulation quantifying the fee indicates an expectation of self-regulation by market players, and the quantum of fees is subject to scrutiny by the Adjudicating Authority. The judgment in "Alok Kaushik vs. Bhuvaneshwari Ramanathan & Ors." affirmed that the Adjudicating Authority has the power to determine fees and expenses payable to professionals.

4. Adjudicating Authority's Jurisdiction to Interfere with the CoC's Decision on the Success Fee:
The Adjudicating Authority held that the success fee was not part of the commercial wisdom of the CoC and could be reviewed for reasonableness. The Amicus Curiae supported this view, stating that the decision of the CoC in the matter of fees is subject to checks and balances through the provisions of the Code and Regulations. The Adjudicating Authority directed the proportionate distribution of the success fee amount among the employees, underpaid operational creditors, and unsecured creditors of the corporate debtor, which would have happened even if the success fee was set aside.

Conclusion:
The Appeal was dismissed, and the Adjudicating Authority's decision to disallow the success fee was upheld. The judgment emphasized that the success fee is not chargeable under the provisions of the IBC and the Regulations, and even if it were, the manner and quantum in which it was claimed were improper and incorrect. The Adjudicating Authority's jurisdiction to review the reasonableness of fees was affirmed.

---