ICAI Issues Judicial Pronouncements in Valuation

ICAI Issues Judicial Pronouncements in Valuation The Institute of Chartered Accountants of India (ICAI) issued Judicial Pronouncements in Valuation. The Hon’ble Supreme Court of India, through its various judgements, has elaborated the scope of court’s jurisdiction to interfere with the opinion of a valuer. It has often considered Valuers to be experts in their field and held that their opinions ought not to be rejected without proper consideration. Court’s obligation is to be satisfied that valuation was in accordance with the law and it was carried out by an independent body. Text of the Cases is Given Below:

Case No. 1

Alok Kaushik Vs Bhuvaneshwari Ramanathan and Ors (2021) In the Supreme Court of India Civil Appeal No. 4065 of 2020 Decided On: 15.03.2021

1. Brief Facts of the Case

The Appellant was appointed as a Registered Valuer of the Corporate Debtor, under Regulation 27 of the Insolvency and Bankruptcy Board of India Regulations, 2016. The Appellant was appointed to value the plant and machinery of “Kavveri Telecom Infrastructure Limited” (hereinafter referred to as “Corporate Debtor”) across India. • The Appellant's appointment fee and other expenses were ratified by the Committee of Creditors (CoC), led by second respondent. • The Appellant claimed to have conducted valuation work of over eighty four sites and to have visited forty sites. Further, several outstation meetings were also stated to have been conducted between the Appellant and the first Respondent i.e., the Resolution Professional. • The National Company Law Appellate Tribunal (NCLAT) set aside the initiation of CIRP against the Corporate Debtor. The NCLAT remanded the matter back to the NCLT to decide on the issue of CIRP costs. The NCLT decided on the fee of the Resolution Professional and reduced it by twenty percent from the fee ratified by the CoC. • In view of the order of the NCLAT, the Resolution Professional cancelled the appointment of the Appellant. In relation to the fee payable to the Appellant, the first Respondent requested him to consider a waiver. In return, the Appellant agreed to reduce his fee by twenty five percent from the fee ratified by the CoC, along with the expenses payable. However, the first Respondent informed the Appellant that the fee as ratified could not be paid and paid a certain sum. • The Appellant then filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 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, noted that a certain amount had already been paid over (Rs. 50,000/-).

2. Key Grounds of Appeal

The real issue which has been sought to be canvassed in the appeal is that in a situation such as present, where the CIRP was set aside by the Appellate Authority, there has to be within the framework of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) a modality for determining the claim of a professional valuer such as the Appellant.

3. Decision

The Hon’ble Supreme Court set aside the impugned judgment and order of the NCLAT and remitted the proceedings 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 Resolution Professional in pursuance of the initiation of the CIRP. The Hon’ble Apex Court held as under: - (i) The view of NCLT that it was rendered functus officio in relation to the Appellant’s claim is an incorrect reading of the jurisdiction of the NCLT as an Adjudicating Authority under the IBC. The Hon’ble Apex Court relied upon its decision in the case of Gujrat Urja Vikas Nigam Ltd. Vs. Amit Gupta and Ors. and held that 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 and hence, the NCLT would have been justified in exercising its jurisdiction under Section 60(5)(c) of the IBC, 2016 and, in exercise of jurisdiction under Article 142 of the Constitution to make a determination of the amount which is payable to an expert Valuer as an intrinsic part of the CIRP costs. (ii) The Appellant was justified in contending that there must be a forum within the ambit and purview of the IBC, 2016 which had the jurisdiction to make a determination on a claim of the present nature, which had been instituted by a Valuer who was appointed in pursuance of the initiation of the CIRP by the Resolution Professional. (iii) Regulation 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 20161 defines 'insolvency resolution process cost' to include the fees of other professionals appointed by the Resolution Professional. (iv) The availability of a grievance redressal mechanism under the IBC, 2016 against an Insolvency Professional does not divest the NCLT of its jurisdiction under Section 60(5)(c) of the IBC, 2016 to consider the amount payable to the Appellant. In any event, the purpose of such a grievance redressal mechanism was to penalize errant conduct of the RP and not to determine the claims of other professionals which form part of the CIRP costs.

4. Key Learnings for Valuers from the above Case

(i) Section 217 of the IBC 2016 empowers a person aggrieved by the functioning of a Resolution Professional to file a complaint to the IBBI. If the IBBI believes on the receipt of the complaint that any Resolution Professional has contravened the provisions of IBC 2016 or the Rules, Regulations or Directions issued by the IBBI, it can, under Section 218 of the IBC 2016 direct an inspection or investigation. Under Section 220 of the IBC 2016, IBBI can constitute a Disciplinary Committee to consider the report submitted by the Investigating Authority. If the Disciplinary Committee is satisfied that sufficient cause exists, it can impose a penalty. (ii) The availability of above grievance redressal mechanism under the IBC 2016 against an Insolvency Professional does not divest the NCLT of its jurisdiction Under Section 60(5)(c) of the IBC 2016 to consider the amount payable to a Registered Valuer appointed under the IBBI Regulations. 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. (iii) A Registered Valuer appointed under Regulation 27 of the Insolvency and Bankruptcy Board of India Regulations, 2016 can approach NCLT to settle its claims forming part of CIRP cost as NCLT in exercising its jurisdiction under Section 60(5)(c) of the IBC 2016 and, in exercise of jurisdiction under Article 142 of the Constitution, can make a determination of the amount which is payable to an expert valuer as an intrinsic part of the CIRP costs. To Read More: Click Here