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Devarajan Raman vs Bank of India Limited

Civil Appeal · 2022 INSC 14Decided 5 Jan 2022
Civil Appeal No.3160 of 2020
D.Y. Chandrachud · A.S. Bopanna

Background

The appellant was appointed Interim Resolution Professional (IRP) for a corporate debtor (Poonam Drums and Containers Pvt. Ltd.) after Bank of India, a financial creditor, initiated insolvency proceedings under the IBC. The NCLAT later set aside the NCLT's admission order on the appeal of the debtor's directors but remitted the matter to decide the IRP's fees and costs, to be borne by the bank. When the appellant sought release of his balance dues (about Rs.9 lakh), an amount the bank itself had verified as consistent with his bid and had agreed to pay, the NCLT, without giving reasons, arbitrarily reduced the payable amount to a flat Rs.5 lakh plus GST, ignoring the appellant's detailed cost statement and the bank's own acceptance. The NCLAT upheld this on appeal, again without adequate reasoning.

Decision Breakdown

The Supreme Court held that both the NCLT and NCLAT had failed to engage with the material on record, particularly the bank's own verification and acceptance of the appellant's claimed fees and costs, and had fixed the payable amount in an "ad hoc" manner without any reasoned basis for how the figure of Rs.5 lakh was arrived at. Since neither tribunal explained the basis for their conclusion, the orders amounted to an abdication of their adjudicatory function. The Court set aside both orders and remanded the fee application to the NCLT for a fresh, reasoned decision, directing it to be decided within one month.

Lesson Learnt

Tribunals deciding disputes over an insolvency professional's fees and costs cannot fix figures arbitrarily or without reasons, especially where the amount claimed has already been verified and accepted by the party liable to pay it; unreasoned orders on such quasi-judicial questions will be set aside and sent back for a proper determination.

Official source (sci.gov.in)View Judgment (PDF)

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