2022 (9) TMI 1220 - AT - Insolvency and Bankruptcy

Tribunal modifies order on payment to Resolution Professional based on voting share.

The tribunal modified the Adjudicating Authority's order, directing the appellant to pay the deceased Resolution Professional's remuneration and costs ... Acceptance of claim of the Resolution Professional for payment of fee - Section 61 of Insolvency and Bankruptcy Code, 2016 - main contention of the Respondents before the Adjudicating Authority was that he was having only 25.54% of voting right being creditor and cannot be compelled to pay half of the share of remuneration and expenses and that he is not liable to pay the legal expenses which was not approved by the CoC and agreed to pay the fee payable to Resolution Professional and other expenses approved by CoC. HELD THAT:- A conjoint reading of Regulation 25A, 26 and 27 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and Regulation 31 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the expenses incurred under the different heads covered by Regulation 31 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 shall be paid by the creditors - In the instant case, the cost incurred by erstwhile RP and remuneration payable to him was approved by CoC in the CoC meetings, the total amount payable is Rs. 16,09,402/-, thus, the legal heirs of deceased RP are entitled to claim the remuneration payable to erstwhile RP and cost incurred by him, approved in CoC meetings. One of the major contentions of the Appellant herein is that the Appellant is having only 25.54% voting share and liable to pay its share of costs. As per provisions of the Act, the Respondent before the Adjudicating Authority Appellant herein, the creditors have to bear the cost of resolution process and remuneration payable to the Resolution Professional in proportionate to voting share, but the Adjudicating Authority directed the creditors to pay 50% of the cost payable to erstwhile RP. Therefore, the direction to the extent of payment of remuneration equally by the creditors is contrary to the provisions of ‘IBC’ and relevant Regulations. The direction to pay equally with other creditor is erroneous, since, the Respondent before the Adjudicating Authority is having 25.54% voting share and therefore liable to pay the expenses in proportionate to the voting share of Appellant herein and before the Adjudicating Authority. Accordingly, the order of the Adjudicating Authority is modified to this extent - the Appeal is allowed in part modifying the order directing the Appellant to pay remuneration and cost of resolution process approved in CoC meeting i.e. Rs. 16,09,407/- proportionate to its voting share. Issues Involved:1. Payment of fees and expenses to the deceased Resolution Professional (RP).2. Proportionate liability of creditors based on voting share.3. Approval of legal expenses incurred by the RP.Issue-wise Detailed Analysis:1. Payment of Fees and Expenses to the Deceased Resolution Professional (RP):The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), challenging the order passed by the National Company Law Tribunal (NCLT), Special Bench, New Delhi. The NCLT had accepted the claim of the Resolution Professional (RP) for payment of fees. The RP, appointed to complete the Corporate Insolvency Resolution Process (CIRP), had constituted the Committee of Creditors (CoC) and conducted four meetings, incurring various expenses. The RP died before the completion of the process. The Adjudicating Authority recorded that the fees payable to the legal heirs of the deceased RP were approved by the CoC in its 1st, 2nd, and 4th meetings. The total amount approved was Rs. 16,09,402. The legal heirs of the deceased RP were entitled to claim this remuneration and the costs incurred by the RP, as approved in the CoC meetings.2. Proportionate Liability of Creditors Based on Voting Share:The main contention of the appellant was that they held only a 25.54% voting share and could not be compelled to pay half of the RP's remuneration and expenses. The Adjudicating Authority's direction for creditors to pay 50% of the costs was contrary to the provisions of the IBC and relevant regulations. The tribunal cited the judgment in State Bank of India Vs. SKC Retails Ltd, which stated that the applicant who files the application under Section 7 or 9 of the IBC is required to bear the expenses, which are to be reimbursed by the CoC to the extent ratified. Therefore, the appellant was liable to pay the expenses in proportion to their voting share of 25.54%.3. Approval of Legal Expenses Incurred by the RP:The appellant argued that they were not liable to pay the legal expenses as these were not approved by the CoC. The tribunal referenced Bharat Hotels Ltd. Vs. Tapan Chakraborty, which established that if the legal fees were not ratified or approved in CoC meetings, the appellant was not liable to pay their share of these fees. Consequently, the direction by the Adjudicating Authority to pay the legal expenses was erroneous and was set aside.Conclusion:The tribunal modified the order of the Adjudicating Authority, directing the appellant to pay the remuneration and costs of the resolution process approved in the CoC meetings proportionate to their voting share of 25.54%. The appeal was allowed in part, and the erroneous direction to pay legal expenses was set aside.