Costs Incurred For Scheme Of Compromise Or Arrangement Not Included In Liquidation Cost: NCLT Kolkata
The National Company Law Tribunal at Kolkata has clarified that expenses incurred by a Liquidator in exploring a compromise or arrangement for the corporate debtor cannot be treated as liquidation cost, and the same cannot be reimbursed to the liquidator. It reiterated the framework under the Liquidation Regulations makes a mandatory distinction between “liquidation cost”...
The National Company Law Tribunal at Kolkata has clarified that expenses incurred by a Liquidator in exploring a compromise or arrangement for the corporate debtor cannot be treated as liquidation cost, and the same cannot be reimbursed to the liquidator. It reiterated the framework under the Liquidation Regulations makes a mandatory distinction between “liquidation cost” and the liquidator's “fee”.
A coram of Judicial Member Bidisha Banerjee and Technical Member Siddharth Mishra, in an order on 9 December 2025, dismissed an application filed by Anil Goel, liquidator of Varrsana Ispat Limited.
“The structure of Regulation 2(1) (ea) further clarifies that the definition of “liquidation cost” is exhaustive and distinctly separate from the Liquidator's fee under Regulation 4. The proviso expressly excludes from liquidation cost any expenditure incurred by the Liquidator in relation to a Section 230 scheme. This exclusion is categorical and admits no exceptions.”, the tribunal observed.
The dispute arose when the liquidator demanded Rs. 1.87 crores from Akshay Jhunjhunwala, the suspended director of Varrsana Ispat, including Rs. 1.84 crores as liquidation fee in relation the proposed scheme for amalgamation of the debtor, which was ultimately rejected by the tribunal.
The liquidator argued that amounts incurred between 6 August 2019 and 13 August 2021 for liquidation was “cost” under Regulation 2B (3), which included Rs. 1.84 crores as liquidator's fee as well as legal and procedural expenses. He claimed that since the scheme was rejected, Akshay Jhunjhunwala was required to bear such cost of the liquidator. The liquidator argued that Varrsana Ispat should not incur the expenses for a proposal that did not materialise.
Akshay Jhunjhunwala argued Regulation 2B deals only with cost and not liquidator's fee, which is governed solely by Regulation 4. He pointed out that the liquidator had already accepted his statutory fees from the liquidation estate and was effectively seeking double payment. It was argued that a scheme proponent cannot be burdened with the liquidator's fee merely because it was rejected.
The tribunal, however rejected liquidator's arguments and held that Regulation 2B deals only with 'cost', and the expenses incurred during the compromise scheme cannot be treated as the liquidator's fee. It said such fee can only be paid from the liquidation estate. It noted that the liquidator had already received his statutory fee from the estate and any attempt to recover it again amounted to double realisation, which was prohibited.
The tribunal relied on the judgment of NCLAT in C.A. Jai Narayan Gupta v. Radhasiriya Properties Pvt Ltd (2023), which held that a liquidator's fee cannot be imposed on a person who proposed a Section 230 scheme, which was rejected by the tribunal. It said the cost becomes payable only when such compromise or arrangement is sanctioned by the tribunal.
It dismissed the application concluding the Liquidation Regulations did not allow the liquidator's claim in relation to compromise or arrangement to be treated as liquidation cost.
Case Title: Anil Goel vs Akshay Jhunjhunwala
Case Number: IA (IBC) No. 872/KB/2022 & IA (IBC) No. 2383/KB/2024 in CP (IB) No. 543/KB/2017
For Liquidator: Advocates Rohit Sharma, Niraj Chamyel, Harsh Gupta, Aishwarya Prasad, Devesh Kr. Bhutra
For Respondent in IA 872, 2383, Respondent No. 3 in IA 1333: Advocates Shaunak Mitra, Dripto Majumdar, Saubhik Chowdhury, Sayantani Banerjee
For Respondent No. 4 in IA 1333 of 2017: Advocate Rishav Banerjee, PP. Bishwal, Sohini Dey