Former resolution professional fees treated as CIRP costs; payment restricted under Reg 34B(5), direction upheld, contempt issue moot

Fees payable to the erstwhile resolution professional were held to constitute CIRP costs under s. 5(13)(a)-(b) IBC, and their payment must follow regs. 34 and 34B of the CIRP Regulations. Reg. 34B(5) mandates that such fees be paid only from specified sources, namely funds available with the corporate debtor, contributions by the applicant or CoC members, or interim finance; accordingly, the AA's direction on the permissible mode of payment was upheld. In light of the successful resolution applicant depositing the quantified CIRP cost amount with the NCLAT Registrar, the contempt/non-payment grievance was treated as infructuous, and the appeal was disposed of with liberty to move the AA if any grievance survives later.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the direction requiring the incoming Resolution Professional to explore interim finance and the Committee of Creditors to consider it for payment of the outgoing Resolution Professional's unpaid fees was legally correct, having regard to the treatment and payment mechanism of CIRP costs under the Code and the CIRP Regulations.

(ii) Whether any individual members of the Committee of Creditors could be held personally responsible on the basis of an "undertaking" for payment of the outgoing Resolution Professional's fees, or whether the statement recorded was only on behalf of the Committee of Creditors.

(iii) Whether, in view of subsequent developments recording deposit/availability of CIRP costs under the approved resolution framework and dismissal of the pending challenges that could affect those funds, the appeal survived for adjudication or had become infructuous; and the appropriate consequential relief.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Correctness of directing exploration of interim finance for payment of the outgoing Resolution Professional's fees

Legal framework (as discussed by the Court): The Court treated the outgoing Resolution Professional's fees as falling within "CIRP costs" and referred to the payment mechanism contemplated under the Code and Regulations 34 and 34B, including that payment can be made from funds available with the corporate debtor, contributions by the applicant or Committee of Creditors members, or funds raised by way of interim finance.

Interpretation and reasoning: The impugned direction required the incoming Resolution Professional to explore the possibility of raising interim finance and required the Committee of Creditors to consider the proposal positively. The Court held that since the outgoing Resolution Professional's fees are CIRP costs, and interim finance is one of the recognized avenues for meeting such costs, the Adjudicating Authority's direction aligned with the prescribed manner of funding and paying CIRP costs.

Conclusion: The Court conclusively held that the Adjudicating Authority "correctly passed" the impugned order directing exploration of interim finance and consideration by the Committee of Creditors for payment of the outgoing Resolution Professional's dues.

Issue (ii): Personal liability of individual Committee of Creditors members and the nature of the recorded "undertaking"

Legal framework (as discussed by the Court): The Court proceeded on the basis that CIRP costs are the responsibility of the Committee of Creditors in accordance with the statutory/regulatory scheme governing their determination and payment, and that an individual member cannot be fixed with responsibility contrary to that framework.

Interpretation and reasoning: The Court accepted the submission that the Committee of Creditors was a necessary party for adjudication on CIRP costs and that "no individual member of the CoC can be held responsible" for such payment. On the alleged undertaking, the Court examined the specific statement recorded in the order dated 22.09.2022 and found it to be a statement by senior counsel "on behalf of the CoC" that the outgoing Resolution Professional's fee "shall be paid as decided by the CoC." From this, the Court concluded that the statement did not create any personal undertaking or individual liability of particular members; it reflected a commitment attributable to the Committee of Creditors' decision-making.

Conclusion: The Court rejected the outgoing Resolution Professional's contention that individual members had given an enforceable personal undertaking to pay his dues, and held that responsibility for such CIRP-cost payment rests with the Committee of Creditors, not individual members.

Issue (iii): Whether the appeal had become infructuous due to subsequent deposit/availability of CIRP costs and resolution of pending challenges; consequential relief

Interpretation and reasoning: The Court noted subsequent developments that funds towards CIRP costs had been deposited in the form of a fixed deposit and that the outgoing Resolution Professional's only surviving concern was the possibility that pending challenges could succeed, leading to reversion of deposited amounts and non-payment. The Court addressed this apprehension by relying on its contemporaneous decisions dismissing the pending appeals that could have impacted the availability of the deposited funds, thereby removing the basis of the apprehension. Given that CIRP costs had been deposited and the contingency feared by the outgoing Resolution Professional no longer survived, the Court held that no live dispute remained requiring appellate interference with the impugned order.

Conclusion: The Court held that the appeal had become infructuous and disposed of it, granting liberty to the outgoing Resolution Professional to approach the Adjudicating Authority in terms of the impugned order if any grievance arises later.

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