NCLT Kolkata: Dismissal Of Scheme Of Compromise At First Motion, Liquidator Not Entitled To Claim Fees And Other Costs

The National Company Law Tribunal (‘NCLT’) Kolkata Bench comprising Bidisha Banerjee (Judicial Member) and D. Arvind (Technical Member) allowed the application filed in Radhasiriya Properties Pvt. Ltd. vs. Jai Narayan Gupta Liquidator of Barcle Enterprises Ltd.. The application has been filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) by Radhasiriya Properties Pvt. Ltd. (Applicant) against the Jai Narayan Gupta (Liquidator) seeking direction to the Liquidator to refund the amount of Rs. 23,88,280. The Tribunal held that when scheme of compromise and arrangement proposed by Applicant is rejected at its first motion by Creditors, Proviso to Rule 2B(3) of Liquidation Process Regulations 2016 does not apply and Liquidator is not entitled to claim his fees and other costs from the Applicant. Background Facts: The Adjudicating Authority had passed an order of Liquidation of Barcle Enterprises Limited (Corporate Debtor) since no Resolution Plan was received in Corporate Insolvency Resolution Process (‘CIRP’). The Applicant submitted its Scheme of Compromise and Arrangement to the Liquidator and upon request from the Liquidator, deposited Rs. 7,88,280/- in the account of the Corporate Debtor. The Liquidator accepted the proposed Scheme of Compromise and Arrangement and filed an application before NCLT to direct the Liquidator to conduct the meeting of the Creditor under Regulation 2B of the IBBI (Liquidation Process) Regulation, 2016 read with Section 230(1) of the Companies Act, 2013. The NCLT via order dated 06.01.2023 allowed the application and directed the Liquidator to hold a meeting of the Creditors under Section 230(1) of the Companies Act, 2013. The Applicant due to due to incessant demands of the Liquidator transferred Rs. 5,31,000/- with an outstanding that the said amount would be adjusted against the final payment to be made under the Scheme proposed. Further sum of money as liquidation costs was demanded and the Applicant made a payment of Rs. 6,00,000/- and of Rs. 4,69,000/-. On 01.03.2023, the Liquidator informed the Applicant that a meeting of creditors was held wherein the Scheme had been rejected by them. The Applicant wrote a letter on 21.03.2023 to the Liquidator requesting him to forthwith refund the aggregated amount of Rs. 23,88,280/-. NCLT Verdict: The NCLT Kolkata allowed the application and held that when scheme of compromise and arrangement proposed by Applicant is rejected at its first motion by Creditors, Proviso to Rule 2B(3) of Liquidation Process Regulations 2016 does not apply and Liquidator is not entitled to claim his fees and other costs from the Applicant. The Tribunal observed that a combined read of of Regulation 2B (3) of the IBBI (Liquidation Process) Regulations, 2016 and Section 230(6) of the Companies Act, 2013 envisages that if any cost incurred by the Liquidator, in relation to compromise or arrangement sanctioned by the Tribunal, shall be borne by the corporate debtor. Proviso to Rule 2B(3) of the Liquidation Process Regulations 2016, provides for bearing of cost by the parties who proposed compromise or arrangement only when such a scheme is not sanctioned by the Tribunal under sub section (6) of Section 230 of the Companies Act. The Tribunal pointed out that as per Order dated 06.01.2023, the Liquidator conducted a meeting among the Creditors of the Corporate Debtor and the scheme was voted upon by 95.58% of the creditors by value wherein the proposal was rejected by the majority of the creditors and the same was intimated to the Applicant. Thus the Tribunal observed that since the proposed scheme was rejected unanimously at its first motion of compromise or arrangement and that the NCLT did not have any scope to sanction the scheme and therefore the Liquidator cannot invoke proviso to Rule 2B(3) of Liquidation Process Regulations 2016. The Tribunal held that all the costs, incurred by the Liquidator in relation to compromise or arrangement including liquidator fee were wrongly claimed from the Applicant. In conclusion, the NCLT directed the Liquidator to refund the entire amount of Rs. 23,88,280/- to the Applicant within two weeks from the date of pronouncement of this order and report compliance. Case Title: Radhasiriya Properties Pvt. Ltd. Vs. Jai Narayan Gupta Liquidator of Barcle Enterprises Ltd. Case No.: I.A. (IB) No. 975/KB/2023 In C.P. (IB) No. 830/KB/2018 Counsel for Applicant: Ms. Swati Dalmia, Advocate Counsel for Respondent: Mr. Jai Narayan Gupta, Advocate (Liquidator in person) Click Here To Read/Download Order

NCLT Kolkata: Dismissal Of Scheme Of Compromise At First Motion, Liquidator Not Entitled To Claim Fees And Other Costs

Sachika Vij

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Sachika Vij

NCLT Kolkata: Dismissal Of Scheme Of Compromise At First Motion, Liquidator Not Entitled To Claim Fees And Other Costs

Sachika Vij

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Sachika Vij

This is a premium content
Available exclusively to
Our subscribers