Company appeal dismissed for challenging liquidation fee procedures without disputing actual SCC decision on remuneration

NCLAT Chennai dismissed a company appeal challenging liquidation costs and fees determination procedures. The appellant questioned the adjudicating authority's directive to have the Stakeholders Consultative Committee (SCC) decide on liquidator remuneration and incidental charges. However, since the SCC had already decided the matter on 09.01.2025 and the appellant failed to challenge that specific decision, the appeal was deemed premature and not tenable. The tribunal held that challenging procedures without disputing the consequential results is impermissible, making the appeal misconceived and warranting dismissal.

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1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in these appeals revolve around the determination and approval of the liquidation costs and fees payable to the Liquidator of the Corporate Debtor. Specifically, the issues include:

• Whether the Liquidator is entitled to the claimed remuneration and costs under Regulation 2(A) of the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
• The appropriateness of the methodology and process adopted by the Adjudicating Authority in directing the Stakeholders' Consultation Committee (SCC) to determine and approve the Liquidator's fees.
• The timing and procedural correctness of the appeals filed by the Liquidator challenging the orders of the Adjudicating Authority.

2. ISSUE-WISE DETAILED ANALYSIS

Determination of Liquidator's Fees and Costs:

• Relevant Legal Framework and Precedents: The appeals are governed by the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016, particularly Regulation 2(A) concerning liquidation costs and fees. The court also considered previous orders issued by the National Company Law Tribunal (NCLT) regarding the Liquidator's fees.
• Court's Interpretation and Reasoning: The Tribunal observed that the Liquidator's claim for fees was not justified due to the lack of significant progress in the liquidation process. The Tribunal emphasized that the fees should be reasonable and correspond to the work performed by the Liquidator. The Tribunal directed the SCC to determine and approve the fees based on the actual work done from the date of appointment until the filing of the Dissolution Application.
• Key Evidence and Findings: The Tribunal noted that the realization from the Corporate Debtor's assets was nil and that there was no substantial progress in the liquidation process. The Tribunal highlighted that the meetings of the SCC were primarily focused on approving the Liquidator's remuneration rather than advancing the liquidation process.
• Application of Law to Facts: The Tribunal applied Regulation 2(A) and found that the Liquidator's claim for INR 1,50,000 per month was unreasonable given the lack of progress in the liquidation process. The Tribunal directed that the fees should be approved by the SCC based on the actual work performed.
• Treatment of Competing Arguments: The Liquidator argued that his claim was in line with previous orders. However, the Tribunal found that the lack of progress in the liquidation process did not justify the claimed fees. The Tribunal also noted procedural lapses by the Liquidator in determining the payable amount.
• Conclusions: The Tribunal concluded that the Liquidator's appeals were premature, as the SCC had not yet determined the fees. The Tribunal dismissed the appeals, directing the SCC to approve reasonable fees within four weeks and instructing the Liquidator to file the Dissolution Application upon receipt of the approved amounts.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, "The Applicants' claim for such remuneration, in the absence of significant advancement in the liquidation process is completely unreasonable." This highlights the Tribunal's stance on the need for fees to be commensurate with the progress in liquidation.
• Core Principles Established: The Tribunal established that Liquidator fees must be reasonable and reflect the actual work done. The Tribunal emphasized the role of the SCC in determining and approving such fees based on the progress of the liquidation process.
• Final Determinations on Each Issue: The Tribunal dismissed all appeals as premature, noting that the SCC had not yet made a determination on the fees. The Tribunal directed the SCC to complete the fee approval process within four weeks and instructed the Liquidator to file the Dissolution Application without delay upon receiving the approved payments.

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