2019 (9) TMI 362 - SCH - Insolvency and Bankruptcy

Supreme Court clarifies liability for expenses in insolvency resolution processes

The Supreme Court interpreted Regulation 33 of the Insolvency and Bankruptcy Board of India Regulations regarding expenses in insolvency resolution ... Costs of the interim resolution professional - who shall bear the costs? - HELD THAT:- Regulation 33(3) indicates that the applicant is to bear expenses incurred by the RP, which shall then be reimbursed by the Committee of Creditors to the extent such expenses are ratified. In the present case, no Committee of Creditors was ever appointed as the interim resolution process did not reach that stage. In these circumstances, it is clear that whatever the Adjudicating Authority fixes as expenses will be borne by the creditor who moved the application. The impugned judgment dated 02.08.2017 is set aside only to the extent that these expenses are to be paid by the Corporate debtor - appeal allowed. Issues:1. Interpretation of Regulation 33 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.2. Liability of expenses in the absence of a Committee of Creditors.Analysis:1. The Supreme Court analyzed Regulation 33 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The regulation outlines the procedure for fixing and reimbursing expenses incurred by the interim resolution professional. It states that the applicant must bear the expenses, which will be reimbursed by the Committee of Creditors to the extent they are ratified. However, in the absence of a Committee of Creditors, the Adjudicating Authority will fix the expenses, making the applicant liable for payment.2. The Court noted that in the case at hand, no Committee of Creditors was appointed as the interim resolution process did not progress to that stage. Therefore, the expenses incurred by the resolution professional would be borne by the creditor who initiated the application. The judgment clarified that the Corporate debtor is not responsible for these expenses. Consequently, the impugned judgment dated 02.08.2017 was set aside to the extent that the expenses are to be paid by the Corporate debtor, and the appeal was allowed on this specific issue.3. In a separate Civil Appeal (C.A. No. 103/2018), the Court found no merit and accordingly dismissed the appeal. The judgment did not provide detailed reasoning for the dismissal of this appeal, indicating that the issues raised in this particular case did not require further elaboration or consideration by the Court.