NCLT Delhi: No Direction Can Be Passed Prior to Adjudication of S.99 Report

NCLT Delhi: No Direction Can Be Passed Prior to Adjudication of S.99 Report

Introduction

The National Company Law Tribunal (NCLT) Delhi has held that any directions pertaining to the fees and expenses of the Resolution Professional (RP) prior to adjudication of the Section 99 report would be premature and contrary to the scheme envisaged under the Insolvency and Bankruptcy Code (IBC).

Factual Background

The Central Bank of India filed four applications seeking replacement of the RP due to his failure to submit a report as per Section 99 of the IBC and for demanding fees before adjudication of the report. The RP, however, argued that the bank did not provide him with the requisite documents and that his demand for fees was reasonable considering the circumstances.

Procedural Background

The tribunal had directed the RP to submit the Section 99 report within 10 days of his appointment. However, the RP failed to file the report within the statutory period. Consequently, the Central Bank of India filed multiple applications seeking his replacement, which were then heard by the tribunal.

Issues

1. Whether the RP's demand for fees was premature – The tribunal considered if raising an invoice for fees before adjudication of the Section 99 report was valid.

2. Whether the RP's failure to submit the report within time was a ground for replacement – The tribunal examined if the delay constituted a dereliction of duty.

Contentions of the Parties

• Central Bank of India’s Contention: The bank contended that the RP raised an exorbitant invoice for fees without submitting the report, making his demand premature.
• RP’s Contention: The RP argued that he had raised a reasonable demand of ₹2,00,000 per case (with 50% in advance) due to the non-cooperation of the bank, which forced him to travel and correspond extensively with both the guarantors and the bank.

Reasoning and Analysis

The bench comprising Shri Manni Sankariah Shanmuga Sundaram (Judicial Member) and Shri Atul Chaturvedi (Technical Member) observed that the RP failed to discharge his duties by not filing the Section 99 report within time and by raising an excessive invoice prior to adjudication. The tribunal clarified that any directions relating to the fees and expenses of the RP before adjudication of the Section 99 report would be premature and contrary to the IBC framework.

Outcome

The NCLT allowed the applications for replacement of the RP filed by the Central Bank of India. This decision underscores the importance of compliance with statutory duties and timelines under the IBC.

In this case, the applicant was represented by Mr. Brijesh Kumar Tamber and Mr. Prateek Kushwaha, Advocates, while the RP was represented by Mr. Rachit Ranjan, Advocate.