Excessive Professional Fee Dispute in IBC Case Raises Concerns

The Adjudicating Authority found the proposed professional fee by the Interim Resolution Professional (IRP) to be exorbitant in a case filed under section 9 of the IBC. The fee quoted was significantly higher than the total outstanding debt amount, raising concerns about reasonableness. Comparisons with the remuneration of the Corporate Debtor's top executives highlighted the disproportionality of the proposed fee. Due to the lack of prescribed rules on fees for IRPs, the matter was referred to IBBI for appropriate action. A conflict of interest was noted as the proposed IRP had a relationship with the petitioner's counsel, prompting further review and compliance monitoring.

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Issues:
- Company petition filed under section 9 of the IBC seeking initiation of Corporate Insolvency Resolution Process.
- Appointment of an Interim Resolution Professional.
- Exorbitant professional fee quoted by the proposed Interim Resolution Professional.
- Comparison of proposed fee with remuneration of Corporate Debtor's MD & CEO.
- Lack of prescribed rules and regulations regarding fee payable to IRP/RP.
- Conflict of interest due to relationship between proposed IRP and counsel in the case.
- Referral of the matter to IBBI for appropriate action.

Analysis:
1. The company petition was filed under section 9 of the IBC seeking the initiation of the Corporate Insolvency Resolution Process. The petitioner sought orders against the respondent company and its directors for the initiation of the process and the appointment of an Interim Resolution Professional (IRP) to manage the company during the resolution process.

2. The Operational Creditor proposed Ms. Bhavna Sanjay Ruia as the IRP for the Corporate Insolvency Resolution Process. However, the proposed professional fee quoted by the IRP was found to be exorbitant by the Adjudicating Authority. The fee quoted was significantly higher than the total outstanding debt amount from the Corporate Debtor, raising concerns about reasonableness and proportionality.

3. The Adjudicating Authority compared the proposed fee with the remuneration of the Corporate Debtor's MD & CEO and two Whole Time Directors. It noted that the IRP's fee was substantially higher than the annual remuneration of the company's top executives, which further highlighted the disproportionality of the proposed fee.

4. Despite the absence of prescribed rules and regulations regarding the fee payable to IRPs/RPs, the Adjudicating Authority emphasized the importance of professionals quoting reasonable and commensurate fees for the work involved in the resolution process. The Authority recommended referring the matter to IBBI for appropriate action and remedial measures against the proposed IRP, including disciplinary action if necessary.

5. Additionally, a conflict of interest was identified as the proposed IRP was the wife of the counsel representing the petitioner in the case. This relationship raised concerns about impartiality and potential bias, especially considering a previous case where the counsel was recommended as an IRP and had to substantially reduce the fee following objections raised by the Adjudicating Authority.

6. As a result, the Registry was directed to forward a copy of the order to the Chairman of IBBI for further review and action. The matter was scheduled for a post on 05.12.2017 to track progress and compliance with the directives issued by the Adjudicating Authority.

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