Liquidator Cannot Claim Fee On SARFAESI Realisations Outside Liquidation Estate: NCLT Ahmedabad

The National Company Law Tribunal (NCLT) at Ahmedabad recently held that when a secured creditor enforces its security interest under the SARFAESI Act without involving the liquidator, the amount realised does not form part of the liquidation estate. The liquidator therefore count in that sale to compute the liquidator's fee.

A coram of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma, while dealing with an application filed by liquidator Ramesh Kumar Totla against State Bank of India in the liquidation of Raghuvanshi Cotton Ginning and Pressing Private Limited, held,

“This asset was not part of the liquidation estate and therefore would not be counted for the purpose of computation of fee even as per Regulation 4(2) of the IBBI (Liquidation Process) Regulations.”

According to the tribunal, only those assets over which the secured creditor has relinquished its security interest form part of the liquidation estate.

Raghuvanshi Mill was admitted to the corporate insolvency resolution process on January 6, 2025, and subsequently ordered to be liquidated. The State Bank of India, the company's sole financial creditor, had already secured possession of the factory land and building under the SARFAESI Act even before the commencement of the insolvency proceedings.

However, despite the liquidation order, the bank opted not to surrender its security interest and instead proceeded to realize the asset independently.

The liquidator, Ramesh Kumar Totla, then sought tribunal directions requiring SBI to pay Rs 85.54 lakh as liquidator's fee, on the basis of the sale made independently made by the bank.

He contended that even in cases where a secured creditor realizes assets on its own, the liquidator remains entitled to a fee under Regulation 4(2) of the IBBI (Liquidation Process) Regulations, 2016, read with Regulation 21A.

SBI, on the other hand, contested this, arguing that the asset was fully sold through its independent enforcement measures, without any assistance from liquidator. The sale therefore, the bank argued, should not form the basis for fee calculation.

Rejecting the liquidator's claim, the tribunal held that where the liquidation estate itself has no value, a fee linked to estate value cannot be claimed. The tribunal further observed that Regulation 4(1) gives primacy to the decision of the Committee of Creditors taken under Regulation 39D.

Since SBI, as the sole member of the CoC, had already fixed the liquidator's fee at Rs 10 lakh for the first six months, that decision was binding and could not be overridden by invoking the slab-based fee mechanism. At the same time, the tribunal clarified that actual liquidation expenses remain payable and directed SBI to reimburse Rs 1.15 lakh incurred towards public announcements and such expenses. 

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