NCLAT New Delhi: Liquidator Is Entitled To His Fee Under S. 34 Of IBC And Regulation 4 Of Liquidation Regulations And Cost Under Regulation 2B Of Liquidation Regulations
Sachika Vij
4 Jan 2024 8:00 AM GMT
The National Company Law Appellate Tribunal ('NCLAT'), New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) has held that the Liquidator is entitled to his fee under Section 34 of the Insolvency and Bankruptcy Code, 2016 ('IBC') and Regulation 4 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations,...
The National Company Law Appellate Tribunal ('NCLAT'), New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) has held that the Liquidator is entitled to his fee under Section 34 of the Insolvency and Bankruptcy Code, 2016 ('IBC') and Regulation 4 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 ('Liquidation Regulations') and Cost under Regulation 2B of Liquidation Regulations.
Background Facts
On 24.01.2022, CA Jai Narayan Gupta ('Liquidator'), the Appellant was appointed as the Liquidator of Barcle Enterprises Limited ('Corporate Debtor') in the Liquidation Process.
Radhasiriya Properties Pvt. Ltd. ('Respondent') proposed an expression of interest in submitting a scheme of compromise and arrangement and submitted its scheme to the Liquidator. Various reminders were sent by the Liquidator to the Respondent requesting the payment towards the cost and fee of the Liquidator as well as for depositing the estimated amount under the Scheme. The total amount payable by the Respondent to the Liquidator was Rs.23.88 Lakhs from 20.04.2022 to 28.02.2023.
The scheme submitted by the Respondent was rejected by the Creditors. The Respondent filed an application before NCLT Kolkata for a refund of Rs. 23.88 Lakhs by the Liquidator
The Liquidator has claimed Liquidator's fee for 13 months as Rs.23.01 Lakhs and rest of the amount included in the total of Rs.24.12 Lakhs is the amount spent on various expenses incurred by the Liquidator.
NCLT Indore in its order dated 03.10.2023 held that the Liquidator is not entitled to receive any fee as the Creditors rejected the scheme of the Respondent. The liquidation cost including the liquidation fee was wrongly claimed by the Liquidator from the Scheme Proponent, i.e., Respondent. It directed the Liquidator to refund the entire amount of Rs.23.88 Lakhs.
The Liquidator has filed an appeal challenging the NCLT Indore Order by relying upon the provisions of Regulation 4(2)(a) read with Proviso to Regulation 2B(3) of the Liquidation Regulations, 2016.
NCLAT Verdict:
The NCLAT New Delhi dismissed the appeal and held that the Liquidator is entitled to his fee under Section 34 of IBC and Regulation Regulation 4 of Liquidation Regulations and Cost under Regulation 2B of Liquidation Regulations.
The Appellate Tribunal emphasized that Sections 34(8) and 34(9) of the IBC dictate that the Liquidator's fee for overseeing liquidation must be sourced from the assets of the liquidation estate. Additionally, the proviso to Liquidation Regulation 2(1)(a) specifies that costs incurred by the Liquidator in a compromise or arrangement under Section 230 of the Companies Act should not be considered part of the liquidation cost.
Furthermore, Liquidation Regulation 2B(3) clarifies that any costs related to a compromise or arrangement sanctioned by the Tribunal under Section 230(6) should be borne by the Corporate Debtor. If the compromise or arrangement is not sanctioned, the parties proposing it are responsible for covering these costs. This implies that the Liquidator can only claim costs from the parties proposing the compromise or arrangement in cases where it is not sanctioned.
The NCLAT noted that Regulation 2B of the Liquidation Regulations specifically addresses the costs incurred by the Liquidator, while Regulation 4 deals with the Liquidator's fee. The definition of 'liquidation cost' in Regulation 2(ea) reinforces that costs related to a compromise or arrangement under Section 230 of the Companies Act are not part of the liquidation cost. When interpreted alongside Regulation 2B, it becomes evident that the costs incurred in a compromise or arrangement should be borne by the Corporate Debtor or Scheme Proponent.
In conclusion, the NCLAT affirmed that the NCLT Indore appropriately instructed the Liquidator to refund the erroneously collected fee. It emphasized that the Liquidator is only entitled to expenses legitimately claimed during the liquidation process. Even after deducting all claimed expenses, the Liquidator is obligated to refund Rs. 22.77 Lakhs, according to their calculations.
Case Title: CA Jai Narayan Gupta (Liquidator of Barcle Enterprises Limited) vs. Radhasiriya Properties Pvt. Ltd.
Case No.: Company Appeal (AT) (Insolvency) No.1473 of 2023
Counsel for the Appellant: Mr. Anoop Prakash Awasthi, Advocate.
Counsel for the Respondent: Ms. Swati Dalmia, Mr. Palzer Moktan, Ms. Safura Ahmed, Advocates.
