2025 (6) TMI 1158 - HC - IBC

Decree of suit - direction to pay the professional fees alongwith interest - case of Appellants is that the Impugned Judgment has incorrectly accepted the version of the Respondent in absence of any written agreement/mandate between the parties regarding the fees to be paid to the Respondent for the professional services - HELD THAT - A careful examination of the entire record of the Suit show that the amount claimed by the Respondent is disproportionate to the work actually carried out as evident from the documentary evidence produced on record especially considering the fees previously paid for similar services to the Respondent. Invoices raised in prior instances including for drafting of notices and claim forms under the IBC reveal significantly lower charges for substantially identical tasks. This stark inconsistency in billing without any demonstrated enhancement in the scope complexity or urgency of work rendered undermines the Respondent s assertion that the fee of Rs. 13, 50, 000/- was settled or agreed upon. Without any evidence of renegotiated terms or any contemporaneous acceptance by the Appellants the inflated demand cannot be said to reflect a fair or agreed consideration for services rendered. In the absence of evidence supporting quantification the only recourse available is to apply the benchmark of fees previously charged by the Respondent for identical service. As there is no evidence indicating that the fee claimed by the Respondent was mutually agreed upon by the parties the Respondent has failed to prove the quantification of the claim. The learned Commercial Court nonetheless proceeded to decree the entire amount without any material on record to justify how the figure was arrived at and thus committed an error. Conclusion - The conclusion arrived at by the learned Commercial Court is unsustainable in the absence of any cogent proof by the Respondent to prove his claim. The evidentiary burden in a suit for recovery lies squarely upon the Plaintiff and in the present case that burden remains inadequately discharged by the Respondent being the original Plaintiff. The learned Commercial Court erred in decreeing the full claim without the Respondent having led any evidence to establish the quantum. The absence of such material proof has rendered the decree unsustainable in law. The Impugned Judgment and Decree are modified to the extent of the amount payable to the Respondent - Appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the impugned judgment and decree directing payment of professional fees of Rs. 13,50,000/- to the Respondent in absence of any written agreement or mandate between the parties is sustainable in law and fact;

(b) Whether the Respondent discharged the evidentiary burden to prove the quantum of fees claimed for professional services rendered;

(c) Whether the Appellants' claim of prior payment of Rs. 50,000/- in cash and their objections to the invoice raised after a delay were valid and substantiated;

(d) The applicability of the parties' prior course of dealing and earlier mandates in assessing the reasonableness and quantification of fees for the services rendered under the disputed invoice;

(e) The proper legal approach to quantification of fees in absence of any written agreement or contemporaneous acceptance of the claimed amount.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Sustainability of decree in absence of written agreement/mandate

The legal framework requires that in suits for recovery of fees, the plaintiff must establish the existence of a contract or mandate and the quantum of fees payable. The absence of a written agreement or mandate does not per se preclude recovery if the plaintiff can otherwise prove the terms and quantum of fees through evidence. However, the burden lies on the plaintiff to discharge this evidentiary burden. The Court noted that the Respondent admitted no written agreement existed for the disputed services and relied solely on a consolidated invoice raised almost eleven months after the services were rendered.

The Court observed that while prior dealings between the parties were governed by written mandates, the present claim lacked any such documentation or contemporaneous acceptance. The Respondent's reliance on the invoice and oral testimony was insufficient to prove the quantum of fees. The absence of any itemized breakup or supporting evidence quantifying the time or complexity of work undermined the claim. The Court emphasized that mere assertion without cogent proof cannot sustain a decree for a substantial amount.

Issue (b): Evidentiary burden to prove quantum of fees

The Respondent produced several exhibits including emails, demand notices, minutes of meetings, and prior invoices related to different assignments and prior mandates with a sister concern. However, none of these documents established an agreed fee for the disputed services. The invoice (Ex. P1 to P5) was a single consolidated bill lacking itemized charges or evidence of hours spent or assistance rendered. The Court found that the Respondent failed to produce any independent evidence to justify the quantum of Rs. 13,50,000/- claimed.

The Court further noted that the Appellants' denial of any outstanding liability and the absence of proof of the alleged cash payment of Rs. 50,000/- was not rebutted by documentary evidence from the Respondent. The Respondent's testimony was held insufficient to discharge the burden of proof on quantification. The Court relied on precedents emphasizing that vague and inconsistent defenses by the Appellants amounted to admission only where credible evidence is absent, but here the Respondent failed to provide credible proof of the claimed amount.

Issue (c): Validity of Appellants' objections and claim of prior cash payment

The Appellants contended that a fee of Rs. 50,000/- was orally agreed and paid in cash during the COVID-19 period for the relevant services, and that the subsequent invoice was belated, exorbitant, and inconsistent with prior course of dealings. The Court found no documentary proof of such cash payment and the Respondent denied receipt of the same. The Appellants' objections to the invoice were duly communicated by email, but the commercial court failed to consider these objections in detail.

The Court held that while the claim of cash payment was rejected due to lack of evidence, the Appellants' contention that the invoice was belated and excessive was supported by comparison with prior invoices and mandates for similar services at significantly lower rates. The Court found the Appellants' objections to be credible and relevant to assessing the reasonableness of the fees claimed.

Issue (d): Relevance of prior course of dealings and earlier mandates

The Respondent's prior engagements with the Appellants' sister concern under a written mandate stipulated fees significantly lower than the amount claimed in the disputed invoice. Earlier invoices for drafting notices and claim forms under the IBC were in the range of Rs. 12,500/- per notice, and advisory services were charged at Rs. 1,00,000/- or less. The Court examined these prior dealings and found a consistent pattern of fees that was starkly inconsistent with the inflated amount claimed in the disputed invoice.

The Court held that in absence of any evidence of renegotiated terms or contemporaneous acceptance of the higher fees, the prior course of dealings provided a benchmark for assessing the reasonable quantum of fees payable. The Court emphasized that the Respondent could not unilaterally fix an exorbitant fee without agreement and expect enforcement.

Issue (e): Proper approach to quantification of fees without written agreement

The Court reiterated the principle that where services are rendered but the quantum of fees is not agreed upon, the claimant must prove the reasonableness of the charges through evidence such as prior dealings, industry standards, time spent, complexity, and assistance provided. In the present case, the Respondent failed to produce such evidence and relied solely on an unsubstantiated consolidated invoice and oral testimony.

The Court found the impugned decree unsustainable as it lacked any cogent reasoning or material to justify the quantum awarded. However, acknowledging that services were rendered, the Court proceeded to quantify the fees based on prior invoices and mandates, applying reasonable rates for drafting notices, advisory services, and claim form preparation.

The Court assessed the fees as follows:

• For two demand notices and advisory for Jaiprakash Associates Ltd. and Jaypee Cement Corporation Ltd.: Rs. 1,25,000/-
• For one demand notice and consultation for Kesoram Industries Ltd.: Rs. 42,500/-
• For one demand notice and consultation for Prakash Industries Ltd.: Rs. 42,500/-
• For claim form drafting and liquidation consultation for Tecpro Systems Ltd.: Rs. 42,500/-
• For general tax advisory: Rs. 30,000/-

Totaling Rs. 2,82,500/- with simple interest @6% per annum from the date of invoice till realization.

3. SIGNIFICANT HOLDINGS

"The evidentiary burden in a suit for recovery lies squarely upon the Plaintiff, and in the present case, that burden remains inadequately discharged by the Respondent being the original Plaintiff."

"The absence of such material proof has rendered the decree unsustainable in law."

"Without any evidence of renegotiated terms or any contemporaneous acceptance by the Appellants, the inflated demand cannot be said to reflect a fair or agreed consideration for services rendered."

"In absence of any written communication, approval, confirmation or agreement from the Appellants accepting the amount of fee to be paid for the assignment in question, the entire case of the Respondent hinged upon unilateral determination of quantum of fees to be paid by the Appellants."

"The learned Commercial Court erred in decreeing the full claim without the Respondent having led any evidence to establish the quantum."

"Considering the fact that the Respondent had provided the services to the Appellants, based on the documentary evidence on record the following fee is quantified for payment to the Respondent..." (followed by detailed fee quantification table)

The Court's final determination modified the impugned judgment and decree to reduce the payable amount to Rs. 2,82,500/- plus interest, thereby rejecting the Respondent's claim for Rs. 13,50,000/- due to lack of evidence substantiating the quantum of fees claimed.