NCLAT Chennai Rules, Ratification Of IRP Fees By CoC Can Be Implied From Meeting Minutes And Conduct
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member), has held that the ratification of fees and expenses payable to an Interim Resolution Professional (IRP) under Regulation 33(3) of the IBBI Regulations, 2016, need not be express or formal. The ratification can be implied from the conduct of the Committee of Creditors (CoC) and the contents of the minutes of their meetings.
This observation came in an appeal filed by the sole financial creditor, Canara Bank, challenging the order of the Adjudicating Authority which directed the payment of Rs. 9,05,058 to the erstwhile IRP, Mr. Kantipudi Venkata Raju. The appeal was dismissed, with the Appellate Tribunal upholding the finding that the CoC had ratified the IRP’s fees and expenses through its conduct and resolutions.
Background of the Case
The dispute arose out of the Corporate Insolvency Resolution Process (CIRP) initiated against S.V.K. Shipping Services Pvt. Ltd. under Section 9 of the Insolvency and Bankruptcy Code (IBC) on a petition filed by operational creditor M/s Tricon Energy (India) Pvt. Ltd. The Adjudicating Authority admitted the petition on May 13, 2022, and appointed Mr. Kantipudi Venkata Raju as the IRP. During his tenure, the IRP claimed a total amount of Rs. 9,05,058 towards fees and expenses.
Canara Bank, the sole financial creditor and the only member of the CoC with 100% voting rights, opposed this claim on the ground that the said fees had not been formally ratified by the CoC as mandated under Regulation 33(3) of the IBBI Regulations. The Bank argued that the Adjudicating Authority erred in allowing the payment in the absence of such formal ratification.
Contentions of the Parties
The primary argument advanced by Canara Bank was that the entitlement to IRP fees under the IBBI framework hinges on ratification by the CoC, and this ratification must be formally recorded. The Bank referred to Regulation 33(3) and (4) to assert that unless the committee ratifies the fees and expenses, they cannot be treated as CIRP costs or be reimbursed.
The IRP, on the other hand, maintained that his appointment and fee structure were clearly discussed in the first CoC meeting held on June 9, 2022. He stated that he had offered to continue as IRP for a fee of Rs. 3,00,000 per month with actual expense reimbursement. In the second CoC meeting held on July 13, 2022, the minutes of the first meeting were placed before the committee and approved, thereby implying ratification of the terms fixed earlier.
The IRP further submitted that the CoC, by approving the minutes and allowing him to function until the appointment of a regular Resolution Professional (RP), had consented to the fees and expenses claimed. The conduct of the CoC, according to the IRP, demonstrated clear and binding ratification.
Observations of the NCLAT
The Tribunal emphasized that the concept of "ratification" under Regulation 33(3) does not mandate a rigid or express form. Instead, it can be understood as either formal or informal confirmation of a prior decision, which can also be inferred through words, actions, or conduct. It held that the act of ratification does not always require a separate express resolution and may be validly inferred from meeting records and the parties’ behavior.
In this case, the Tribunal observed that the minutes of the second CoC meeting, held on July 13, 2022, clearly reflected approval of the minutes of the first meeting dated June 9, 2022. These first meeting minutes had recorded the IRP’s consent to work on a specified fee and expense structure. The Appellate Tribunal found no evidence contradicting this approval, noting that the only CoC member—Canara Bank—had voted in favor of the resolution at both meetings.
Quoting the Adjudicating Authority’s findings, the Appellate Tribunal observed: “The observations which has made by the Tribunal for remitting the amount of Rs. 9,05,058/- in respect of fee and expenses incurred by the IRP during his tenure is absolutely justified if it is read in context of the finding, which has been recorded in the minutes of the 2nd CoC meeting as it was held on 13.07.2022, which has approved the minutes of the meeting of the 1st CoC meeting which was held on 09.06.2022.”
The Tribunal also addressed the appellant's argument based on the Indian Contract Act’s definition of ratification, noting that ratification in this context can be by conduct and not merely by formal resolution. It further emphasized that once the CoC, holding 100% voting rights, approved the minutes reflecting the agreed fees and expenses, any claim of unilateral determination was contrary to facts.
Verdict
Finding no merit in the appeal, the NCLAT concluded that the CoC, through its actions and approval of meeting records, had validly ratified the fees and expenses of the IRP. Therefore, the adjudicating authority rightly ordered the payment of Rs. 9,05,058 to Mr. Kantipudi Venkata Raju. The appeal filed by Canara Bank was accordingly dismissed.
“Since the solitary issue which has been argued by the Learned Counsel for the Appellant with regard to the non-ratification of the fees & expenses of the IRP by the CoC... now stands settled with ratification of the minutes of 1st CoC meeting, there is no such anomaly in the direction... which would call for interference by this Appellate Tribunal.” All related interlocutory applications were also closed.
Appearance
For Appellant: Mr. M.L. Ganesh, Advocate
For Respondent: Mr. Sriram Venkatavaradan, Advocate for Respondent No.1
Cause Title: Canara Bank V. Kantipudi Venkata Raju & Anr.
Case No: IA No. 580/2025 in Company Appeal (AT) (CH) (Ins) No. 165/2023
Coram: Justice Sharad Kumar Sharma [Member – Judicial], Jatindranath Swain [Member – Technical]
