Liquidator not entitled to fees under Regulation 4(2)(b) when banks handle sale and distribution independently

The NCLT Kolkata held that a liquidator is not entitled to fees under Regulation 4(2)(b) of IBBI (Liquidation Process) Regulations, 2016 when the liquidator has not actually realized or distributed any amount. Since the respondent banks conducted the entire sale of the unit without liquidator involvement and handled realization and distribution independently, the liquidator's claimed fees were not payable. The tribunal distinguished this case from precedent where liquidator fees were mandatorily payable, concluding that banks had complied with Regulation 21A obligations except for the improperly claimed liquidator fees. Application disposed.

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ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

1. Whether the Liquidator is entitled to fees for the sale of the Panagarh Unit, which was conducted solely by the Respondent Banks, under Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016.

2. Whether the Respondent Banks have complied with Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, concerning the payment of liquidation costs.

ISSUE-WISE DETAILED ANALYSIS

1. Entitlement of Liquidator's Fees

Relevant legal framework and precedents: The Tribunal considered Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016, which outlines the entitlement of a liquidator to fees as a percentage of the amount realized and distributed. The Tribunal also referenced the case of Shikshak Sahakari Bank Ltd. v. Mr. Jagdish Kumar Parulkar, where the NCLAT held that the liquidator is entitled to fees even if they did not directly realize or distribute the secured asset.

Court's interpretation and reasoning: The Tribunal interpreted Regulation 4(2)(b) to mean that a liquidator is entitled to fees only when they have realized or distributed any amount. Since the sale of the Panagarh Unit was conducted by the Respondent Banks without the liquidator's involvement, the Tribunal found that the liquidator was not entitled to fees for this sale.

Key evidence and findings: The Tribunal found that the Respondent Banks conducted the entire sale process of the Panagarh Unit and realized the proceeds without the liquidator's involvement.

Application of law to facts: Applying Regulation 4(2)(b), the Tribunal concluded that the liquidator was not entitled to fees for the sale of the Panagarh Unit as they did not participate in the realization or distribution of the sale proceeds.

Treatment of competing arguments: The Tribunal considered the liquidator's argument, referencing the NCLAT's decision in Shikshak Sahakari Bank Ltd., but distinguished it on the facts, noting that in the present case, the liquidator had no role in the sale process.

Conclusions: The Tribunal concluded that the liquidator was not entitled to fees for the sale of the Panagarh Unit under Regulation 4(2)(b).

2. Compliance with Regulation 21A

Relevant legal framework and precedents: Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, requires secured creditors to pay their share of liquidation costs if they choose to realize their security interest.

Court's interpretation and reasoning: The Tribunal interpreted Regulation 21A as mandating secured creditors to contribute towards liquidation costs, even if they proceed to realize their security interest.

Key evidence and findings: The Tribunal found that the Respondent Banks had contributed towards liquidation costs, excluding the liquidator's fees for the Panagarh Unit sale.

Application of law to facts: The Tribunal applied Regulation 21A to determine that the Respondent Banks had complied with their obligations to contribute towards liquidation costs, except for the contested liquidator's fees.

Treatment of competing arguments: The Tribunal acknowledged the Respondent Banks' argument that they had fulfilled their obligation under Regulation 21A by contributing to the liquidation costs and that the liquidator's fees for the Panagarh Unit sale were not applicable.

Conclusions: The Tribunal concluded that the Respondent Banks had complied with Regulation 21A, except for the liquidator's fees related to the Panagarh Unit sale.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "A bare perusal thereof explicates that a liquidator is entitled to fees towards realisation and distribution only when he has 'realised' or 'distributed' any amount and not otherwise."

Core principles established: The Tribunal established that a liquidator is not entitled to fees for the sale of assets conducted solely by secured creditors without the liquidator's involvement in realization or distribution.

Final determinations on each issue: The Tribunal determined that the liquidator was not entitled to fees for the sale of the Panagarh Unit and that the Respondent Banks had complied with their obligations under Regulation 21A, except for the liquidator's fees related to the Panagarh Unit sale.

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