NCLAT New Delhi: Liquidator Is Not Entitled To Charge Fee From Scheme Proponent Submitting Scheme Under S.230 Of The Companies Act

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 not entitled to charge any fee from the Scheme Proponent, who has submitted the Scheme under Section 230 of the Companies Act, 2013 read with Regulation 2B of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 ('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. On various requests, the Respondent paid a total amount of Rs.23.88 Lakhs from 20.04.2022 to 28.02.2023 to the Liquidator. 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 not entitled to charge any fee from the Scheme Proponent, who has submitted the Scheme under Section 230 of the Companies Act, 2013 read with Regulation 2B of Liquidation Regulations, 2016. The Appellate Tribunal observed different provisions of the Insolvency and Bankruptcy Code, 2016, ('IBC') and Liquidation Regulations. It noted that the statutory provision under Sections 34(8) and 34(9) of IBC provides that the Liquidator fee for the conduct of the liquidation proceedings has to be paid from the value of the liquidation estate assets. The same are provided as follows: “Section 34(8) of IBC: An insolvency professional proposed to be appointed as a liquidator shall charge such fee for the conduct of the liquidation proceedings and in such proportion to the value of the liquidation estate assets, as may be specified by the Board. (9) The fees for the conduct of the liquidation proceedings under sub-section (8) shall be paid to the liquidator from the proceeds of the liquidation estate under section 53.” Further, the proviso to Liquidation Regulation 2(1)(ea) which defines the 'liquidation cost' makes it clear that cost, if any, incurred by the Liquidator in a compromise or arrangement under Section 230 of the Companies Act shall not form part of liquidation cost. “Regulation 2(1)(ea) of Liquidation Regulations: “liquidation cost” under clause (16) of section 5 means- (i) fee payable to the liquidator under regulation 4; (ii) remuneration payable by the liquidator under sub-regulation (1) of regulation 7; (iii) costs incurred by the liquidator under sub-regulation (2) of regulation 24; (iv) costs incurred by the liquidator for preserving and protecting the assets, properties, effects and actionable claims, including secured assets, of the corporate debtor; (v) costs incurred by the liquidator in carrying on the business of the corporate debtor as a going concern; (vi) interest on interim finance for a period of twelve months or for the period from the liquidation commencement date till repayment of interim finance, whichever is lower; (vii) the amount repayable to contributories under sub-regulation (3) of regulation 2A; (viii) any other cost incurred by the liquidator which is essential for completing the liquidation process: Provided that the cost, if any, incurred by the liquidator in relation to compromise or arrangement under section 230 of the Companies Act, 2013 (18 of 2013), if any, shall not form part of liquidation cost.” The Liquidation Regulation 2B(3) also specifies that any cost incurred by the Liquidator about...

NCLAT New Delhi: Liquidator Is Not Entitled To Charge Fee From Scheme Proponent Submitting Scheme Under S.230 Of The Companies Act

Sachika Vij

Tags