2024 (4) TMI 538 - AT - Insolvency and Bankruptcy

NCLAT rules liquidator gets percentage-based fees only after asset realization, not monthly remuneration under Regulation 39D

Ashok Kumar Gulla Liquidator for SRS Limited Versus State Bank of India, Bank of India, Union Bank of India, Punjab National Bank (Earlier Oriental Bank of Commerce), Canara Bank, Mr. Abhinav Garg, Mr. Baljit Kapoor, Mr. Naveen Kwatra, Excise & Taxation Officer-cum Assessing Authority, Knight Watch Security Pvt. Ltd.

The NCLAT dismissed an appeal regarding liquidator remuneration fixation. The tribunal held that under existing IBBI regulations at the time of ... Fixation of remuneration of liquidator - whether any remuneration is to be paid to the liquidator for the services being rendered by him, when the assets of the corporate debtor are under attachment and cannot be auctioned? - HELD THAT:- From perusal of the regulations as they existed on the date of liquidation order, it appears that the fees of the liquidator was to be either the fees decided by the CoC under Regulation 39D of IBBI (CIRP) Regulations, 2016 or a percentage of fee on the amount that is realised/ distributed during the liquidation process. The Regulations, as it existed at the time on the date of the liquidation order, do not envisage payment of any fees or remuneration to the liquidator on a monthly basis, if such fee is not fixed by the CoC under Regulation 39D of IBBI (CIRP) Regulations, 2016. Considering the regulations as they existed at the time when liquidation order was issued in this case, and that no fees was fixed by the CoC, it is opined that fees to be paid to the Liquidator in this case shall be as per the percentage prescribed in Regulation 4(2)(b) of IBBI (Liquidation Process) Regulations, 2016 on realization and distribution of proceeds from auction of assets. There are no reason to interfere in the order of the Adjudicating Authority. Appeal dismissed. Issues Involved:1. Fixation of Liquidator's Remuneration2. Jurisdiction of NCLT/NCLAT3. Applicability of Liquidation Process RegulationsSummary:1. Fixation of Liquidator's Remuneration:The appellant, liquidator of M/s SRS Limited, filed an appeal against the NCLT Chandigarh's order dated 18.04.2023, seeking fixation of his remuneration. The liquidator requested remuneration at Rs. 4 lakh + GST monthly from 29.01.2020 to 31.05.2022 and Rs. 2 lakh + GST per month from 01.06.2022 till the closure of the liquidation process. The liquidator argued that due to the attachment of assets by the Directorate of Enforcement (ED) and the Income Tax Department, he was unable to sell the corporate debtor's assets and hence could not earn fees as per Regulation 4(2)(b) of the Liquidation Process Regulations. Despite his efforts to lift the attachment and manage the corporate debtor's affairs, the Stakeholders Consultation Committee (SCC) decided that fees would be paid as per Regulation 4(2)(b).2. Jurisdiction of NCLT/NCLAT:The liquidator cited Section 60(5)(c) of IBC 2016 and the Supreme Court's decision in Alok Kaushik v. Bhuvaneshwari Ramanathan, asserting that NCLT has jurisdiction to adjudicate disputes related to insolvency resolution or liquidation proceedings. The respondent argued that the issue of monthly remuneration does not fall within the ambit of Section 60(5) and that the liquidator's fee should be determined by the SCC as per Regulation 4(2)(b).3. Applicability of Liquidation Process Regulations:The Tribunal examined the relevant regulations and amendments. It was noted that prior to the amendment on 25.07.2019, Regulation 4(2) allowed the liquidator to be paid a percentage of the amount realized and distributed. The Tribunal found that the fees of the liquidator should be as per the percentage prescribed in Regulation 4(2)(b) on realization and distribution of proceeds from the auction of assets, as no fees were fixed by the CoC under Regulation 39D of IBBI (CIRP) Regulations, 2016.Conclusion:The Tribunal upheld the decision of the Adjudicating Authority, dismissing the liquidator's applications for monthly remuneration. The appeal was dismissed, and it was concluded that the liquidator's fees should be determined as per Regulation 4(2)(b) of the Liquidation Process Regulations, 2016.