2024 (4) TMI 868 - AT - Insolvency and Bankruptcy

NCLAT upholds IRP fees payment after creditor's repeated delays in insolvency proceedings

The NCLAT dismissed an appeal challenging payment of IRP fees and CIRP expenses. The appellant, sole CoC member, repeatedly deferred decisions across ... Reasonableness and proportionality of IRP fees - Code of Conduct for Insolvency Professionals - Regulation 34B of IBBI (Insolvency Professionals for Corporate Persons) Regulations, 2016 - Judicial review of IRP remuneration - Committee of Creditors' duty to be represented by authorised decision-makers - Liquidation following failure of CIRPReasonableness and proportionality of IRP fees - Regulation 34B of IBBI (Insolvency Professionals for Corporate Persons) Regulations, 2016 - Judicial review of IRP remuneration - Committee of Creditors' duty to be represented by authorised decision-makers - Validity of the Adjudicating Authority's fixation of IRP fees at Rs.33 lakhs and allowance of CIRP expenses of Rs.9 lakhs - HELD THAT: - The Tribunal examined whether the Adjudicating Authority erred in fixing the IRP's remuneration and CIRP expenses. The record shows the IRP had placed before the CoC detailed minutes and a chart of 106 activities undertaken during CIRP, and the CoC minutes recorded the steps taken by the IRP in each meeting. The Tribunal found no dispute that only three CoC meetings were held, but the delay in decision-making was attributable to the sole CoC member (the Appellant) repeatedly deferring approvals and seeking higher authority clearance, a fact noted by the Adjudicating Authority in allowing liquidation and not challenged by the Appellant. The IRP had initially claimed a higher fee but voluntarily reduced the claim to the rate adopted by the Adjudicating Authority, which also reduced CIRP expenses. Given the IRP's documentary record of activities, the absence of objection by the CoC during the CIRP to the quantum claimed, the voluntary reduction of fees by the IRP, and the CoC's own role in delaying decisions, the Adjudicating Authority's application of the fee schedule (including reliance on Regulation 34B as a benchmark) and its conclusion that Rs.33 lakhs and Rs.9 lakhs were reasonable did not warrant interference. The Tribunal therefore upheld the Adjudicating Authority's evaluation and exercise of discretion in fixing remuneration and expenses. [Paras 12, 13, 14, 15, 16]Appeal dismissed; direction to pay IRP fees of Rs.33 lakhs within one month and CIRP expenses of Rs.9 lakhs to be paid in accordance with the Tribunal's earlier directionsFinal Conclusion: The appellate challenge to the Adjudicating Authority's fixation of the IRP's fees and allowance of CIRP expenses fails; the Tribunal finds the fees and expenses reasonable in the circumstances, dismisses the appeal and directs payment as ordered. Issues Involved:1. Fixation of Interim Resolution Professional (IRP) fees.2. Reimbursement of Corporate Insolvency Resolution Process (CIRP) expenses.3. Adherence to the timeline of Insolvency and Bankruptcy Code (IBC).Summary:1. Fixation of IRP Fees:The Appellant challenged the impugned order directing the payment of Rs 33 lakhs as fees to the IRP, arguing that the fee was fixed on the higher side and not in sync with the work performed. It was contended that the Adjudicating Authority failed to apply the test of reasonability and proportionality as per Clause 25 of the Code of Conduct for Insolvency Professionals and wrongly relied on Regulation 34(B) of IBBI (Insolvency Professionals for Corporate Persons) Regulations, 2016, which was not applicable since the IRP was appointed before 01.10.2022.2. Reimbursement of CIRP Expenses:The Appellant also contested the reimbursement of Rs 9 lakhs as CIRP expenses, claiming they were excessive, particularly the expenses under the heading of Advocate fees. The IRP, however, defended the expenses, asserting that all activities listed were necessary for the conduct of CIRP and that the expenses were reduced from Rs 11.91 lakhs to Rs 9 lakhs.3. Adherence to IBC Timeline:The Appellant argued that the IRP failed to complete the CIRP within the stipulated 180 days, necessitating an extension of 90 days, and eventually leading to liquidation. The IRP countered that the delay was due to the indecision and non-cooperation of the Appellant, who was the sole member of the Committee of Creditors (CoC). The IRP claimed to have made the best possible efforts to complete the CIRP within the stipulated time and provided a detailed list of 106 activities performed.Findings:The Tribunal found that the IRP had conducted necessary activities and that the delay was attributable to the Appellant's indecision and non-cooperation. The minutes of the CoC meetings indicated that the Appellant deferred decisions, requiring internal approvals, which delayed the CIRP process. The Adjudicating Authority's decision to fix the IRP fees at Rs 1 lakh per month and reduce the CIRP expenses to Rs 9 lakhs was deemed reasonable and in consonance with Regulation 34B of IBBI (Insolvency Professionals for Corporate Persons) Regulations, 2016.Conclusion:The appeal was dismissed, directing the Appellant to pay Rs 33 lakhs as IRP fees within one month and to settle the CIRP expenses of Rs 9 lakhs as per the Tribunal's order dated 01.11.2023.