Tribunal rules on Interim Resolution Professional fees under Insolvency and Bankruptcy Code

The Tribunal held that the Interim Resolution Professional (IRP) was not entitled to fees beyond the statutory period as per Section 22(5) of the Insolvency and Bankruptcy Code. The decision to replace the IRP by the Committee of Creditors (CoC) was deemed valid, and the IRP's claim for fees until his replacement was limited to the actual work performed. The Tribunal clarified that regulatory provisions cannot override statutory requirements, and the IRP's entitlement should align with the work executed. An interim payment of Rs. 10 lakhs was considered adequate, and the IRP's claim for fees beyond the statutory period was rejected.

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Issues Involved:
1. Entitlement of Interim Resolution Professional (IRP) to fees and expenses.
2. Validity of the CoC's decision to replace the IRP.
3. Applicability of Section 22 and Regulation 17 of the Insolvency and Bankruptcy Code (IBC), 2016.

Detailed Analysis:

1. Entitlement of Interim Resolution Professional (IRP) to Fees and Expenses:
The primary issue was whether the IRP was entitled to fees and expenses till the date of his replacement. The CoC in its first meeting on 16.07.2018 approved the IRP’s fees at Rs. 5,00,000 per month. Despite the decision to replace him, the IRP claimed entitlement to fees until 09.10.2018, when the Adjudicating Authority officially replaced him. The Tribunal noted that the IRP was obstructed by the CoC members from performing his duties post the first meeting, and no substantial work was conducted by him after 16.07.2018. The Tribunal concluded that the IRP's entitlement to fees should be limited to the actual work performed and the statutory provisions governing such situations.

2. Validity of the CoC's Decision to Replace the IRP:
The CoC resolved to replace the IRP in its first meeting and filed an application for the same on 31.07.2018. The Tribunal examined Section 22 of the IBC, which allows the CoC to replace the IRP by another Resolution Professional (RP) by a majority vote. The Tribunal emphasized that once the CoC decides to replace the IRP, the IRP cannot claim entitlement to fees beyond the statutory period unless there is an order from the Adjudicating Authority to continue his role. The CoC's decision was valid and aligned with the statutory provisions.

3. Applicability of Section 22 and Regulation 17 of the Insolvency and Bankruptcy Code (IBC), 2016:
Section 22(5) of the IBC requires an order from the Adjudicating Authority to continue the IRP if the Board does not confirm the new RP within ten days. The Tribunal highlighted that no such order was passed in this case, and thus, the IRP could not claim continuance beyond the statutory period. Regulation 17(3) of the CIRP Regulations, 2016, which allows the IRP to perform the functions of the RP if the appointment is delayed, cannot be interpreted to override the statutory scheme of Section 22(5). The Tribunal clarified that Regulation 17(3) is subservient to the Code and cannot defeat the statutory provisions.

Conclusion:
The Tribunal concluded that the IRP was not entitled to fees beyond the statutory period as per Section 22(5) of the IBC. The Adjudicating Authority erred in allowing the IRP’s claim for fees till 09.10.2018 without considering the statutory scheme and the actual work conducted by the IRP. The interim order of payment of Rs. 10 lakhs was deemed sufficient to cover the IRP’s fees and CIRP costs. The appeal was allowed, and the order dated 26.06.2019 was set aside to the extent of the IRP's claim for fees beyond the statutory period.

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