Liquidator denied fixed monthly fee; remuneration only percentage-based under Regulation 4(2)(b) when assets realised or distributed

NCLAT dismissed the liquidator's appeal seeking fixation of a monthly fee during the liquidation period. Applying Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016, the Tribunal held that the liquidator's fee, being percentage-based on amounts realised or distributed net of liquidation costs, was not payable where no assets were realised or distributed. It further noted that neither the CoC at the time of recommending liquidation nor the SCC during liquidation had fixed any separate remuneration. Consequently, the adjudicating authority's refusal to grant a fixed monthly fee of Rs. 2.5 lakhs was upheld.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the delay in filing and refiling the appeal was liable to be condoned.

1.2 Whether the liquidator was entitled to a fixed monthly fee during liquidation in the absence of fee fixation by the Committee of Creditors or the Stakeholders' Consultation Committee.

1.3 Whether the liquidator could claim fee on the basis of Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016, despite having realised or distributed no assets.

1.4 Whether a prior decision of the Committee of Creditors fixing remuneration for another proposed liquidator could confer a right to similar remuneration on the present liquidator.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Condonation of delay in filing and refiling the appeal

Interpretation and reasoning

2.1 The Tribunal noted that there was 9 days' delay in filing the appeal and 36 days' delay in refiling after issuance of the defect list. The explanation offered was that the appeal was voluminous and documents had to be collated and shared for refiling.

2.2 The Tribunal accepted the reasons advanced as "sufficient cause" for both filing and refiling delays.

Conclusions

2.3 Delay of 9 days in filing and 36 days in refiling the appeal was condoned, and the interlocutory applications for condonation of delay were allowed.

Issue 2 - Entitlement of the liquidator to a fixed monthly fee in absence of fee fixation by CoC or SCC

Legal framework (as discussed)

2.4 The Tribunal considered Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016, particularly sub-regulation (2)(b), which prescribes the liquidator's fee in cases where it is not fixed under Regulation 4(1) or 4(1A), as a percentage of the amount realised (net of other liquidation costs) and distributed.

2.5 The Tribunal also referred to the Adjudicating Authority's findings that: (i) the Committee of Creditors did not fix the liquidator's remuneration at the time of recommending liquidation under Section 33 of the Code, as envisaged under Regulation 39D of the CIRP Regulations; and (ii) the Stakeholders' Consultation Committee did not fix the fee in its first meeting as required under Regulation 4(1A) of the Liquidation Regulations.

Interpretation and reasoning

2.6 The Tribunal noted that the liquidator's proposal for a monthly fee of Rs. 2.5 lakhs was placed before the Stakeholders' Consultation Committee but was not approved.

2.7 In view of the admitted position that neither the Committee of Creditors nor the Stakeholders' Consultation Committee had fixed the liquidator's fee, the Tribunal held that the case fell under Regulation 4(2) of the Liquidation Regulations, and not under any provision permitting a fixed monthly fee.

2.8 The Tribunal endorsed the Adjudicating Authority's view that, in such circumstances, the liquidator's remuneration "shall be calculated only as a percentage of the amount realised (net of other liquidation costs) and distributed during the liquidation process, and not by way of a fixed monthly fee."

Conclusions

2.9 The liquidator was not entitled to a fixed monthly fee of Rs. 2.5 lakhs in the absence of fee fixation by the CoC or SCC, and his remuneration had to be governed strictly by Regulation 4(2) of the Liquidation Regulations.

Issue 3 - Entitlement to fee under Regulation 4(2)(b) where no assets are realised or distributed

Legal framework (as discussed)

2.10 The Tribunal quoted Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016, which entitles a liquidator, in cases not covered under sub-regulation (1) and (1A), to a fee "as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation" based on specified slabs of realisation and distribution.

2.11 The Tribunal also noted the clarification appended to clause (b), that the liquidator is entitled to fee corresponding to the amount realised where he realises but does not distribute, and corresponding to the amount distributed where he distributes amounts not realised by him.

Interpretation and reasoning

2.12 It was an undisputed fact that the liquidator had neither realised any assets of the corporate debtor nor distributed any amount to stakeholders.

2.13 The Tribunal held that, since entitlement under Regulation 4(2)(b) is explicitly linked to the "amount realised net of other liquidation costs" and/or the "amount distributed," no fee can accrue in the absence of either realisation or distribution.

2.14 The Tribunal rejected the contention that steps taken by the liquidator, such as efforts for revocation of attachment by the Directorate of Enforcement, could in themselves justify fee entitlement under Regulation 4(2)(b) without actual realisation or distribution.

Conclusions

2.15 As no assets had been realised or distributed, the liquidator had no entitlement to remuneration under Regulation 4(2)(b), and the rejection of his claim for fee by the Adjudicating Authority was upheld.

Issue 4 - Effect of prior CoC decision fixing fee for another proposed liquidator

Interpretation and reasoning

2.16 The liquidator argued that the CoC had fixed the fee for a liquidator earlier recommended by it, and although that recommendation was rejected by the Adjudicating Authority, the present liquidator, being appointed in place of the recommended person, should be entitled to the fee earlier fixed by the CoC.

2.17 The Tribunal noted the Adjudicating Authority's finding that the CoC had not fixed the present liquidator's remuneration at the time of recommending liquidation, and that this factual finding was not disputed.

2.18 The Tribunal held that, in the absence of any CoC resolution or SCC decision specifically fixing the present liquidator's remuneration, he could not rely on fee fixed for another recommended liquidator to claim a fixed monthly fee.

Conclusions

2.19 A prior decision of the CoC fixing remuneration for another proposed liquidator did not confer any right upon the present liquidator to claim the same or similar fee; his remuneration remained governed strictly by Regulation 4(2) of the Liquidation Regulations.

2.20 The appeal challenging rejection of the application for fixation of monthly fee of Rs. 2.5 lakhs was found to be without merit and was dismissed.

---