The Bombay High Court has held that an administrative failure to obtain prior sanction for professional fees exceeding the prescribed ceiling cannot deprive a court-appointed valuer of reasonable remuneration for work that was duly performed and accepted.

Expressing regret over an “extraordinary” delay of more than two decades, the bench of Justice R.I. Chagla and Justice Farhan P. Dubash sanctioned professional fees of ₹6.51 lakh and awarded interest of ₹8.20 lakh to a panel valuer whose bills had remained unpaid since May 2004.

A Division Bench of Justice R.I. Chagla and Justice Farhan P. Dubash observed that professionals engaged by a court or its officers legitimately expect their fees to be paid in accordance with law within a reasonable period.

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“Administrative or procedural difficulties following disposal of the substantive proceedings should not result in a professional being left without payment for decades and thereafter being required to litigate for recovery of fees which were never disputed on merits,” the Court observed.

The order was passed in a Court Receiver’s Report arising from a writ petition filed by Kuber Mutual Benefits Limited and others against the State of Maharashtra and other authorities.

The underlying writ petition challenged, among other things, the attachment of properties under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999.

In December 2003, the High Court directed its Court Receiver to inspect the properties, report on their condition, invite offers for purchasing a building on an “as is where is” basis, and examine whether the incomplete construction could be completed before the property was sold.

The Court Receiver was permitted to obtain technical assistance for carrying out the exercise. Accordingly, M/s AT & TS Associates, a panel valuer, was engaged to inspect and value the properties.

The valuer inspected the sites and submitted a detailed report on May 5, 2004. It subsequently raised six bills on May 15, 2004, aggregating to ₹7,01,858, including service tax.

Five bills related to separate valuation reports for properties situated at CBD Belapur, Sectors 4 and 11 of Kharghar, Sector 10 of Vashi, and Village Pahur in Raigad district. The sixth bill covered site inspections, photographs and preparation of a status report.

The writ petition was disposed of in September 2005. However, the valuer’s bills remained unpaid despite repeated communications to the petitioners and their advocates.

The Court Receiver filed an earlier report in 2010 seeking directions on whether the valuer’s bills should be restricted to the ceilings prescribed under the applicable guidelines or whether higher fees should be sanctioned.

That report remained pending without any order. The Court Receiver also repeatedly requested the Registry to place it before the Court, but the matter was not listed for consideration.

Meanwhile, the company’s whereabouts became unknown, its director died, and it was reportedly placed under liquidation. The account maintained by the Court Receiver had no funds and was running into a debit balance of ₹684.

In May 2025, the valuer submitted revised invoices after removing the service tax component. This reduced the principal claim from ₹7.01 lakh to ₹6.51 lakh.

The valuer claimed an additional ₹8.20 lakh as simple interest at 6% per annum for 21 years. It also applied a Cost Inflation Index-based multiplier of 3.21238 to the combined principal and interest, raising its total claim to ₹47.26 lakh.

The High Court first examined whether the valuer’s claim was governed by the guidelines issued in 1994 or those issued in 1999.

It noted that the 1994 guidelines governed the valuation of immovable properties, particularly when the valuation was undertaken to facilitate their sale. In contrast, the 1999 guidelines applied to valuations for determining royalty or compensation payable by an occupier.

Since the valuer was engaged to assess immovable properties in aid of their proposed sale, the Court held that the 1994 guidelines governed the assignment.

The Court also rejected the application of the 2007 guidelines, observing that the valuer was engaged in January 2004, completed its work in May 2004 and raised its bills in the same month. Guidelines introduced later could not govern an assignment that had already been completed.

Clause 9 of the 1994 guidelines prescribed a maximum fee of ₹25,000 for the valuation of immovable property and required prior sanction from the Court where the fees exceeded that amount.

Interpreting this provision, the Bench held that the expression “prior sanction” related to the payment of fees exceeding ₹25,000 and not necessarily to the appointment of the valuer.

The Court found no stipulation requiring sanction to be secured before the valuer was appointed. It said that the nature, extent and complexity of a valuation assignment might not always be capable of precise assessment at the appointment stage.

The number of properties to be inspected, the volume of documents requiring examination and the complexity of the reports might become clear only after the work was completed.

“A Valuer appointed at the instance of the Court Receiver is entitled to proceed on the basis that the assignment entrusted to it is a legitimate Court-authorised assignment,” the Bench observed.

It added that if an officer of the Court failed to obtain sanction before paying fees exceeding the ceiling, that administrative omission could not, by itself, deprive the professional of reasonable remuneration for accepted work.

The requirement would be satisfied if the Court’s sanction was obtained before payment of the amount exceeding the prescribed ceiling, it ruled.

The High Court further held that the ₹25,000 ceiling should ordinarily be applied separately to each distinct property valued and not collectively to the entire assignment.

Applying one aggregate ceiling irrespective of the number of properties would produce an anomalous and unreasonable result, the Bench said.

A valuer engaged to inspect and value one property could not be treated on the same footing as a valuer required to undertake separate exercises for five or ten properties, irrespective of the additional work, time and professional responsibility involved.

In the present case, the valuer had prepared five separate valuation reports for five distinct properties. Four of the five valuation bills exceeded ₹25,000. The sixth bill concerned inspections, photographs and the status report.

The Court noted that there was no allegation that the exercise was perfunctory, the bills were inflated, or the reports were defective or unreliable. Neither the Court Receiver nor any party to the original proceedings had disputed the nature or extent of the work.

The bills remained unpaid because the writ petition was subsequently disposed of, no funds were available, the company could not be traced, and the earlier Court Receiver’s report remained pending—not because the work was disputed.

Considering these exceptional circumstances, the High Court sanctioned the revised principal claim of ₹6,51,062 in full.

Although the 1994 guidelines did not expressly provide for interest on delayed professional fees, the Court held that the absence of such a provision did not prevent it from granting reasonable compensation in an appropriate case.

A professional who completed work entrusted by the Court but remained deprived of legitimately earned remuneration should not be left uncompensated for an extraordinary delay, the Bench said.

The valuer had restricted its claim to simple interest at 6% per annum. Finding the rate fair and reasonable, the Court awarded ₹8,20,338 as interest calculated up to May 2025.

The valuer was also held entitled to continuing simple interest at 6% per annum on the principal amount of ₹6,51,062 from June 1, 2025, until actual payment.

The total amount sanctioned up to May 2025 was therefore ₹14,71,400.

The High Court, however, rejected the valuer’s request to enhance the claim to ₹47,26,710 by applying a multiplier based on the alleged erosion in the purchasing power of the rupee.

The Bench reasoned that interest was already being awarded to compensate for deprivation of money and recognise its time value. Granting an additional inflation-linked amount for the same period would result in overlapping or double compensation.

The Court also noted that the valuer had applied the inflation multiplier not merely to the principal but to the combined amount of principal and interest. This would effectively grant an inflation-linked enhancement even on the amount awarded as compensation for delay.

Since the Court Receiver’s account contained no funds, the High Court declined to direct payment from the Receiver’s general account or from public funds.

The Court permitted the valuer to lodge its sanctioned claim before the concerned Official Liquidator dealing with the company’s liquidation.

It directed the Court Receiver to forward the order, valuation reports, revised invoices and other relevant documents to the Official Liquidator within three weeks.

The Bench clarified that sanctioning the professional fees did not determine the priority of the claim in liquidation or impose personal liability on the Official Liquidator. The claim would have to be considered in accordance with the applicable statutory priorities and orders governing the liquidation.

The valuer had also sought to implead the wife of the company’s deceased director and freeze the bank accounts and assets of companies with which she was allegedly associated if the liquidation funds proved insufficient.

The High Court refused the request, finding no substantive material establishing her personal liability for the company’s dues.

“Mere association with a company, or relationship with a person who was formerly associated with that company, cannot by itself constitute a legal basis for fastening personal liability or freezing the assets of separate corporate entities,” the Bench held.

Such relief would require appropriate pleadings, a legally sustainable foundation and an opportunity of hearing for the persons or entities whose assets were proposed to be affected, the Court added.

It nevertheless left the valuer free to initiate independent proceedings if a lawful basis for a claim against any such person or entity could be established.

Having determined the professional fees and permitted the valuer to approach the Official Liquidator, the High Court discharged the Court Receiver without requiring the passing of accounts.

It also permitted the suit account to be closed without adding further costs, charges or expenses.

The Court directed the Registry and the Court Receiver’s office to ensure in future cases that outstanding professional fees are identified before a Receiver is discharged or proceedings are closed. Appropriate directions for payment or recovery should be obtained at that stage, it said.

Expressing regret to the valuer, the Bench termed the delay of more than two decades “wholly disproportionate” to the nature of the assignment and an unfortunate consequence of the manner in which the matter remained unresolved.

The Court also recorded its appreciation for the assistance rendered by amicus curiae Sharad Bansal.

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