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NCLT has jurisdiction to determine amount payable to the valuer as an intrinsic part of CIRP costs
A Division Bench of the Hon’ble Supreme Court comprising Justices Dr. Dhananjaya Y. Chandrachud and M.R. Shah in the matter titled Alok Kaushik v. Mrs. Bhuvaneshwari Ramanathan and Others, REED 2021 SC 03551 held that the National Company Law Tribunal (NCLT) has jurisdiction under Section 60(5)(c) of Insolvency and Bankruptcy Code, 2016 (IBC) to adjudicate as insolvency cost, the monetary claim of an expert valuer appointed by Resolution Professional (RP) during the Corporate Insolvency Resolution Process (CIRP), even after the CIRP is set aside.
The NCLT initiated the CIRP against the Corporate Debtor and the first respondent was appointed as RP. Thereafter, the RP appointed the Appellant as a registered valuer of the Plant and Machinery of the Corporate Debtor, under Regulation 27 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (IRP Regulations). The Appellant’s appointment fee (Rs 7.50 lakhs plus applicable GST) and other expenses were ratified by the Committee of Creditors (CoC), led by respondent No. 2. The NCLAT set aside the initiation of CIRP against the Corporate Debtor and remanded the matter back to the NCLT to decide on the issue of CIRP costs. In view of the order of the NCLAT, the RP cancelled the appointment of the Appellant who then agreed to reduce his fee by 25% from the fee ratified by the CoC, along with the expenses payable. However, on 2 March 2020, the RP informed the Appellant that the fee as ratified could not be paid, and paid a sum of Rs 50,000.
The Appellant filed an application under Section 60(5) of the IBC before the NCLT challenging the non-payment of the fees. However, the NCLT dismissed the application concluding that it had been rendered functus officio. In appeal, the NCLAT rejected the contention of the Appellant, noting that an amount of Rs 50,000 had already been paid over. Aggrieved, the Appellant moved before Supreme Court in an appeal under Section 62 of the IBC challenging the order of the NCLAT.
The issue in the present appeal related to the jurisdiction of NCLT to determine the costs, charges, expenses, and professional fees are payable to a registered valuer appointed after the initiation of the CIRP under the IBC, in a situation where the CIRP is eventually set aside by the NCLT or NCLAT.
The Supreme Court noted that recently in Gujarat Urja Vikas Nigam Limited v Amit Gupta and Others, REED 2021 SC 03533, it was clarified that the NCLT under Section 60(5)(c) of the IBC has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. In the present case, though the CIRP was set aside later, the claim of the Appellant as registered valuer related to the period when he was discharging his functions as a registered valuer appointed as an incident of the CIRP. Hence, the Adjudicating Authority was sufficiently empowered under Section 60(5)(c) of the IBC to decide the amount which is payable to an expert valuer as an intrinsic part of the CIRP costs. Further, Regulation 34 of the IRP Regulations also defines ‘insolvency resolution process cost’ to include the fees of other professionals appointed by the RP.
The Supreme Court also observed that the availability of a grievance redressal mechanism under sections 217-220 of 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 as 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.
Accordingly, the impugned judgment of the NCLAT was set aside and the proceedings were 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.