DEVARAJAN RAMANversusBANK OF INDIA LIMITED

                        [2022] 1 S.C.R. 975                             975


                      DEVARAJAN RAMAN                                   A
                                 v.
                   BANK OF INDIA LIMITED
                  (Civil Appeal No. 3160 of 2020)
                                                                        B
                        JANUARY 05, 2022
        [DR. DHANANJAYA Y CHANDRACHUD AND
                  A.S. BOPANNA, JJ.]
      Insolvency and Bankruptcy Code, 2016 – Costs and expenses
incurred by Resolution Professional (RP) – In pursuance to an email     C
of the respondent, the appellant submitted his bid for appointment
as an Interim Resolution Professional – Corporate Insolvency
Resolution Process (CIRP) was initiated by the order of NCLT and
the appellant was appointed as Interim Resolution Professional –
The order of NCLT was set aside in appeal and the proceedings           D
were remitted back to determine fee and costs of the CIRP incurred
by appellant – Appellant addressed the letter to respondent showing
the amount payable as fees and cost – The total amount was of Rs
14,75,660/- – Amount of Rs. 5,66,667/- was reimbursed by the
respondent leaving the balance amount Rs 9,08,993/- – Respondent
replied to the appellant’s letter stating that upon verification, the   E
costs and fees were found in conformity with both the technical
and financial bid, based on which the assignment was awarded –
Appellant filed application before NCLT for obtaining release of
remaining cost and fees – NCLT directed the respondent to pay
the expenses incurred and an amount of Rs 5,00,000 plus GST             F
towards the fee of the RP – Appeal was filed by appellant for
challenging reduction in cost and fees by NCLT – NCLAT dismissed
the appeal of appellant and held that the amount of Rs 5,00,000/
- as fee, in addition to the expenses, appears to be reasonable –
Before the Supreme Court, the appellant submitted that both NCLT
and NCLAT erroneously have not scrutinized the factual position         G
and awarded the ad hoc amount – On appeal, held: Considering
the respondent’s reply to the letter of appellant and absence of
consideration of submissions made by appellant by the NCLT –
Neither the basis of the claim nor its reasonableness was
considered by the Adjudicating Authority – The Appellate Authority      H
                                975
976           SUPREME COURT REPORTS                      [2022] 1 S.C.R.


A     proceeded in an ad hoc manner – Both the orders suffers from
      abdication in the exercise of jurisdiction – Remand ordered – The
      order and judgement of NCLAT and NCLT set aside – NCLT to
      decide the matter afresh – Insolvency and Bankruptcy Board of
      India (Insolvency Resolution Process for Corporate Persons)
      Regulations, 2016 – Regulation 34.
B
            Allowing the appeal, the Court
             HELD: 1. In the present case, after the NCLAT set aside
      the order of the NCLT initiating the CIRP, the proceedings were
      remitted back for determining the insolvency resolution costs.
C
      It is material to note that the appellant had addressed a letter to
      the respondent on 13 December 2019 prior to the filing of the
      application to which the respondent responded on 24 January
      2020 stating that, upon verification, the costs and fees were found
      in conformity with both the technical and financial bid, based on
D     which the assignment was awarded. In the application which was
      filed by the appellant before the NCLT, the appellant annexed a
      statement of costs, the amount which was reimbursed with the
      balance dues at Annexure ‘D’. The order of the NCLT, however,
      reveals that none of the submissions of the appellant have been
      considered. The adjudicating authority merely directed the
E
      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 has been considered by
      the adjudicating authority. The appellate authority has merely
      proceeded in an ad hoc manner on the ground that the amount of
F     Rs 5,00,000 as fee, in addition to the expenses, appears to be
      reasonable. 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 this Court to deduce the basis on which the payment of an
G     amount of Rs 5,00,000 together with expenses has been found to
      be reasonable. Consequently, an order of remand becomes
      necessary. [Para 16][982-C-G]
            Alok Kaushik v Bhuvaneshwari Ramanathan (2021) 5
            SCC 787 – referred to.
H
        DEVARAJAN RAMAN v. BANK OF INDIA LIMITED                          977


      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3160                 A
of 2020.
      From the Judgment and Order dated 30.07.2020 of the National
Company Law Appellate Tribunal at New Delhi in Company Appeal
(AT) (Insolvency) No. 646 of 2020.
                                                                          B
       Ms. Anjali Sharma, Ms. Shagun Matta, Deepak Bashta, Advs.
for the Appellant.
     Vadlamani Seshagiri, Shreyuss Shankar Joshi, Mrs. Bela
Maheswari, Adv. for the Respondent.
      The Judgment of the Court was delivered by                          C
      DR. DHANANJAYA Y CHANDRACHUD, J.
      1. This appeal arises from a judgment of the National Company
Law Appellate Tribunal1 dated 30 July 2020 in Company Appeal (AT)
Insolvency No 646 of 20202.                                               D
       2. The issue in dispute relates to the payments of costs and
expenses incurred by the Resolution Professional3. Pursuant to an email
dated 4 February 2019 of the respondent, who was a financial creditor
of Poonam Drums and Containers Private Limited (the Corporate
Debtor), the appellant submitted his technical and financial bid on 5     E
February 2019 for appointment as an Interim Resolution Professional.
On 8 March 2019, the respondent filed a petition under Section 7 of the
Insolvency and Bankruptcy Code 20164 against the Corporate Debtor.
On 20 September 2019, the Corporate Debtor was admitted to the
insolvency resolution process by the National Company Law Tribunal 5
and the appellant was appointed as an Interim Resolution Professional.    F
The order of appointment of the appellant is reflected in operative
direction VI of the order of the NCLT, which reads as follows:
      “VI. That this Bench at this moment appoints Mr Devarajan
           Raman, a registered Insolvency Resolution Professional
                                                                          G
1
  “NCLAT or appellate authority”
2
  Mr Devarajan Raman, Resolution Professional Poonam Drums & Containers
Pvt Ltd v Bank of India Ltd
3
  “RP”
4
  “IBC”
5
  “NCLT or adjudicating authority”                                        H
978               SUPREME COURT REPORTS                         [2022] 1 S.C.R.


A                   having Registration Number [IBBI/IPA-002/IP-N00323/
                    2017-Number 18/10928] as Interim Resolution
                    Professional to carry out the functions as mentioned under
                    I&B Code. The fee payable to IRP/RP shall comply with
                    the IBBI Regulations/Circulars/Directions issued in this
                    regard.”
B
            3. On 19 December 2019, the order of the NCLT was set aside in
      appeal6 by the NCLAT at the behest of the Directors of the Corporate
      Debtor. By the order of the appellate authority, the proceedings were
      remitted to the NCLT to decide upon the fee and costs of the Corporate
      Insolvency Resolution Process7 incurred by the appellant which was to
C     be borne by the respondent as a financial creditor.
             4. On 30 December 2019, the appellant addressed a letter to the
      respondent enclosing a statement showing the amount payable as fee
      and costs. The amount was quantified in the amount of Rs 14,75,660
      until 19 December 2019. An amount of Rs 5,66,667 was reimbursed by
D     the respondent leaving in balance, according to the appellant, an amount
      of Rs 9,08,993.
             5. The appellant moved the NCLT in an application on 17 January
      2020 for obtaining the release of the remaining fee and costs. The principal
      relief which was claimed was in the following terms:
E
            “1.     That the Respondent Bank of India, be directed to make
                    payment of the CIRP cost including fees of the Applicant
                    Resolution Professional as per the details furnished in the
                    Annexure D.”

F             6. On 24 January 2020, the respondent replied to the appellant’s
      letter dated 30 December 2019 stating that it had verified the details of
      the fee and costs stated by the appellant and found them in conformity
      with the technical and financial bid based on which he had been awarded
      the assignment, together with the approval of the Committee of Creditors8.
      The respondent stated that it would release the payment to the appellant,
G     upon receipt of an order of the NCLT. By its order dated 7 February
      2020, the NCLT disposed of the application in the following terms:

      6
        Company Appeal (AT) Insolvency No 1092 of 2019
      7
        “CIRP”
      8
H       “CoC”
            DEVARAJAN RAMAN v. BANK OF INDIA LIMITED                         979
               [DR. DHANANJAYA Y CHANDRACHUD, J.]

      “MA 223/2020 is filed by the Resolution Professional for his fees.     A
      On hearing both sides, the Respondent Bank is directed to pay all
      the expenses incurred by RP and Rs.5,00,000 /- plus GST towards
      the fee of the RP.
      Accordingly, MA 223/2020 is allowed and disposed of.”
     7. The appellant filed an appeal before the NCLAT. Among the            B
grounds of appeal, the relevant ground of challenge is extracted below:
      “(vi) That the abovementioned application filed by the appellant
            was taken up and heard by the National Company Law
            Tribunal, Mumbai Bench, on 7th February, 2020. On the
            said date, even though the appellant explained to the Hon’ble    C
            Bench that the financial creditor had duly accepted the fee
            quoted by him, and there was no contest whatsoever on
            the part of the respondent financial creditor to the payment
            of the c.i.r.p. cost incurred by the appellant, including his
            fee, the Hon’ble Mumbai Bench proceeded to pass the
            impugned order reducing the c.i.r.p. costs and fee quoted        D
            by the appellant, without citing any reasons for the same,
            or even noticing the appellant’s contentions in the said
            regard. In fact, the respondent bank affirmed during the
            course of the hearing on 7th February, 2020, that it was
            agreeable to paying the said amount. However, the same           E
            was also disregarded, and in fact, was not even noticed in
            the order. Copies of the minutes of meeting between the
            appellant and respondent financial creditor, and of the other
            documents evidencing their agreement as to the fee to be
            paid to the appellant, are annexed herewith and marked as
            Annexure - C (Collectively). Annexed as Annexure D is a          F
            statement showing the amount paid by the respondent to
            the appellant after the passing of the impugned order, which
            is a sum of Rs. 7,09, 154/-. An amount of Rs. 1,99,839/-
            therefore yet remains to be paid, and this is reflected in the
            said statement as well.”                                         G
      8. The NCLAT, while dismissing the appeal, observed that:
      (i)     The appellant had worked for about three months as RP;
      (ii)    The expenses had been allowed in full and the consolidated
              amount of Rs 5,00,000 plus GST allowed as fee of the RP
              for the entire period was not unreasonable; and                H
980                   SUPREME COURT REPORTS                          [2022] 1 S.C.R.


A              (iii)    Fixation of the fee is not a business decision depending on
                        the commercial wisdom of the CoC.
            9 Ms Anjali Sharma, counsel appearing on behalf of the appellant,
      challenged the order of the NCLAT principally on the following grounds:
               (i)      The statement of fee and expenses submitted by the appellant
B                       was in terms of the technical and financial bid;
               (ii)     It was categorically stated in the letter of the appellant dated
                        30 December 2019 that the fourth CoC meeting held on 10
                        December 2019 had ratified all the expenses up to 30
                        November 2019, after which no meeting took place;
C              (iii)    The respondent, as a matter of fact, by its letter dated 24
                        January 2020, found, upon verification, that the fee and
                        expenses as claimed were admissible;
               (iv)     The NCLT did not scrutinize or verify the factual position
                        and merely awarded an ad hoc figure of Rs 5,00,000 while
D                       the NCLAT has committed a similar error on the ground
                        that an amount of Rs 5,00,000 was found to be reasonable;
                        and
               (v)      The appellant worked as an IRP for three months which is
                        half the period of one hundred and eighty days envisaged
E                       for completing the process.
             10. In this backdrop, counsel submitted that in terms of the decision
      of this Court in Alok Kaushik v Bhuvaneshwari Ramanathan9, the
      adjudicating authority would have jurisdiction under Section 60(5)(c) of
      IBC. In the present case, the jurisdiction has (it is urged) been improperly
F     exercised in the sense that there has been no application of mind to the
      basis of the claim and the figures which were accepted by the financial
      creditor.
             11. On the other hand, Mr Vadlamani Seshagiri, counsel appearing
      on behalf of the respondent, submitted that the appellant accepted the
      order of the NCLAT dated 19 December 2019 remitting the proceedings
G
      back to the NCLT for determining the costs and fee payable to the RP.
      Moreover, it was sought to be urged that the payment which has been
      made to the RP is commensurate with the work which was done over a
      period of three months.

H     9
          (2021) 5 SCC 787
         DEVARAJAN RAMAN v. BANK OF INDIA LIMITED                                 981
            [DR. DHANANJAYA Y CHANDRACHUD, J.]

        12. Responding to the above submissions, it has been urged on             A
behalf of the appellant that the appellant did not challenge the order of
the NCLAT remitting the proceedings back to the NCLT for determination
of the costs and fee because it was not necessary for the appellant to do
so. Moreover, it has been submitted that the real grievance of the appellant
is that the claim has not been assessed or analyzed in terms of what was
                                                                                  B
agreed, when the appellant submitted his bid or in terms of the circular
of the Insolvency and Bankruptcy Board of India dated 12 June 2018.
      13. At the outset, it must be noted that the jurisdiction of the
adjudicating authority to consider the claim of a registered valuer was
considered in the judgment of this Court in Alok Kaushik (supra). In
that case, the NCLT held that once the CIRP was set aside, it was                 C
rendered functus officio. The order of the adjudicating authority was
upheld in appeal. In that context, this Court, after adverting to the
provisions of the relevant Regulations, observed as follows:
      “19. Though the CIRP was set aside later, the claim of the appellant
      as registered valuer related to the period when he was discharging          D
      his functions as a registered valuer appointed as an incident of the
      CIRP. NCLT would have been justified in exercising its jurisdiction
      under Section 60(5)(c) of the IBC and, in exercise of our jurisdiction
      under Article 142 of the Constitution, we accordingly order and
      direct that in a situation such as the present case, the adjudicating       E
      authority is sufficiently empowered under Section 60(5)(c) of the
      IBC to make a determination of the amount which is payable to
      an expert valuer as an intrinsic part of the CIRP costs. Regulation
      34 of the IRP Regulations defines “insolvency resolution process
      cost” to include the fees of other professionals appointed by the
      RP. Whether any work has been done as claimed and if so, the                F
      nature of the work done by the valuer is something which need
      not detain this Court, since it is purely a factual matter to be assessed
      by the adjudicating authority.
       14. Regulation 34 of the the Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process for Corporate Persons) Regulations,          G
2016 provides as follows :
      “34. Resolution professional costs.—The committee shall fix the
           expenses to be incurred on or by the resolution professional
           and the expenses shall constitute insolvency resolution
           process costs.                                                         H
982             SUPREME COURT REPORTS                           [2022] 1 S.C.R.


A                   Explanation.—For the purposes of this regulation,
                   “expenses” include the fee to be paid to the resolution
                   professional, fee to be paid to insolvency professional entity,
                   if any, and fee to be paid to professionals, if any, and other
                   expenses to be incurred by the resolution professional.”
B            15. The Insolvency and Bankruptcy Board of India has issued a
      circular on 12 June 2018. The circular, inter alia, requires the insolvency
      professional to ensure that the fees payable to him during the CIRP are
      reasonable and the approval of the CoC for the fee or other expenses is
      obtained, wherever approval is required.
C            16. In the present case, after the NCLAT set aside the order of
      the NCLT initiating the CIRP, the proceedings were remitted back for
      determining the insolvency resolution costs. It is material to note that the
      appellant had addressed a letter to the respondent on 13 December 2019
      prior to the filing of the application to which the respondent responded
      on 24 January 2020 stating that, upon verification, the costs and fees
D     were found in conformity with both the technical and financial bid, based
      on which the assignment was awarded. In the application which was
      filed by the appellant before the NCLT, the appellant annexed a statement
      of costs, the amount which was reimbursed with the balance dues at
      Annexure ‘D’. The order of the NCLT, however, reveals that none of
E     the submissions of the appellant have been considered. The adjudicating
      authority 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 has been considered
      by the adjudicating authority. The appellate authority has merely
      proceeded in an ad hoc manner on the ground that the amount of Rs
F     5,00,000 as fee, in addition to the expenses, appears to be reasonable.
      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
G     has been found to be reasonable. Consequently, an order of remand
      becomes necessary.
            17. We accordingly allow the appeal and set aside the impugned
      judgment and order of the NCLAT dated 30 July 2020. Similarly, the
      order of NCLT dated 7 February 2020 is set aside. MA No 223/2020 in
H     CP (IB) 970/MB/2019 is restored to the file of the NCLT for a decision
          DEVARAJAN RAMAN v. BANK OF INDIA LIMITED                              983
             [DR. DHANANJAYA Y CHANDRACHUD, J.]

afresh. The NCLT, upon remand, is requested to expedite the disposal            A
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.
       18. The appeal is disposed of in the above terms.
       19. Pending application, if any, stands disposed of.
                                                                                B

Ankit Gyan                                                    Appeal allowed.
(Assisted by : Aarsh Choudhary, LCRA)



                                                                                C




                                                                                D




                                                                                E




                                                                                F




                                                                                G




                                                                                H