NCLAT Upholds Jurisdiction of Adjudicating Authority to Determine Fees and Expenses of RP

The New Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) has upheld the jurisdiction of the Adjudicating Authority ( National Company Law Tribunal, Jaipur Bench ) to determine the fees and expenses of the Resolution Professional ( RP ).

The Corporate Insolvency Resolution Process ( CIRP ) against Raj Buildhome Pvt. Ltd. commenced by an order dated 03.05.2019. The Financial Creditor, Khozim Yusuf Nagarwala, filed an application under Section 7, leading to an appeal before the NCLAT. On 11.12.2019, the NCLAT allowed the appeal, quashed the CIRP, and issued directions to release the Corporate Debtor from the CIRP. It further directed the Financial Creditor to pay the CIRP costs and fees of the RP.

Following the NCLAT's order, the Adjudicating Authority dismissed the Company Petition on 12.12.2019 and instructed the Financial Creditor to ensure compliance with the NCLAT's directives. However, when the Financial Creditor failed to make the necessary payments, the RP filed a Contempt Petition and I.A, seeking dismissal of the Contempt Petition.

The Appellant, Khozim Yusuf Nagarwala, contended that the Adjudicating Authority should not have computed the fee and expenses of the RP in contempt jurisdiction. He argued that the RP was required to file a report before the Adjudicating Authority for determining the fee and expenses, which had not been done. Additionally, he challenged the directions regarding the expenses amounting to Rs. 3,01,427/-, claiming that they were unsustainable due to lack of material evidence.

On the other hand, Amol Vyas, counsel for the RP, refuted these claims. He argued that the Adjudicating Authority was within its jurisdiction to compute the fee and expenses in compliance with the NCLAT's order. He further asserted that the Financial Creditor had not paid the required amount to the RP and denied that the bills for Rs. 3,01,427/- were the same as those for Rs. 2,41,512/-.

The NCLAT held that the Adjudicating Authority had the jurisdiction to determine the fees and expenses of the RP as per its previous order dated 11.12.2019. It emphasised that the Financial Creditor was liable to pay the CIRP costs and fees as directed, and the Adjudicating Authority was entitled to examine the entitlement of these fees and expenses.

The three-member bench of Justice Ashok Bhushan ( Chairperson ), Barun Mitra ( Member Technical ), and Arun Baroka ( Member Technical ) set aside the direction issued in paragraph 15.3 of the impugned order, stating that the Adjudicating Authority could only decide the fee and expenses based on the material before it. The bench approved the fees of Rs. 7,30,000/- and the CIRP expenses of Rs. 2,41,512/- but invalidated the additional Rs. 3,01,427/- expenses directive.

To Read the full text of the Order CLICK HERE

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