2026 (3) TMI 761 - AT - IBC

Resolution Professional Fees: actual expenses and fees remain payable until approval of a withdrawal application; fee fixation lies with the creditors.

Resolution professional entitlement: the resolution professional is entitled to fees and reimbursement of actual expenses incurred from filing of a ... Entitlement to fees and expenses for the period after filing of an application for withdrawal under Section 12A of the Code until approval and handover - Committee of Creditors' exclusive power to fix resolution professional fees - Limited jurisdiction of Adjudicating Authority to fix fees only at CIRP initiation where applicant does not propose fees - Validity of the Adjudicating Authority's reduction of the appellant's fee to a lower amount without recommendation of the CoC and consequent relief. Payment of resolution professional fees until approval of Section 12A withdrawal - HELD THAT:- The Tribunal held that Regulation 30A(7) requires deposit of actual expenses incurred 'till the date of approval by the Adjudicating Authority' and, when read with the Explanation to Regulation 34 and Regulation 31(d), the fee of the resolution professional constitutes part of those expenses. Accordingly, the resolution professional remains duty bound to manage the corporate debtor until handover and is entitled to be compensated for fees and expenses incurred up to the date of approval of the withdrawal application by the Adjudicating Authority; payment cannot be confined to the date of filing of the Section 12A application alone. [Paras 24, 31, 33] The resolution professional is entitled to fees and expenses up to the date of approval of the Section 12A application and until handover to the committee. Committee of Creditors' exclusive power to fix resolution professional fees - Limited jurisdiction of Adjudicating Authority to fix fees only at CIRP initiation where applicant does not propose fees - HELD THAT:- The Tribunal found that Regulation 34 vests the CoC with the power to fix expenses payable to the resolution professional and Regulation 33 permits the Adjudicating Authority to fix expenses only where the applicant has not fixed them. There is no provision empowering the Adjudicating Authority generally to alter the CoC's commercial decision on fees. Accordingly, the Adjudicating Authority lacks jurisdiction to fix or modify the resolution professional's fee except in the narrow circumstance where the applicant has not proposed the fee at initiation. [Paras 25, 26, 30, 34] Fixing or varying the resolution professional's fee is primarily the prerogative of the CoC; the Adjudicating Authority has no general power to change that fixation except as provided in Regulation 33. Remand for fresh decision in accordance with law - HELD THAT:- The Tribunal held that the Adjudicating Authority erred in reducing the fee further to the impugned amount without having jurisdiction to do so in the circumstances and without applying Regulation 30A(7). The earlier order reducing the fee to a specified amount had attained finality, but the Adjudicating Authority's subsequent unilateral reduction could not be sustained as correct law. In view of these findings the Tribunal set aside the impugned order and remanded the matter to the Adjudicating Authority for fresh decision in accordance with law. [Paras 26, 27, 35, 36] Impugned order reducing the fee was set aside and the matter remanded to the Adjudicating Authority to decide in accordance with law. Final Conclusion: The appeal is allowed; the impugned order is set aside and the matter is remanded to the Adjudicating Authority to determine fees and entitlement in accordance with the Code and CIRP Regulations, having regard to the CoC's role and Regulation 30A(7). Issues: (i) Whether the Resolution Professional is entitled to fees and expenses for the period after filing of an application for withdrawal under Section 12A of the Code until approval and handover; (ii) Whether the Adjudicating Authority has jurisdiction to fix or reduce the fee of the Resolution Professional without recommendation of the committee of creditors.Issue (i): Entitlement to fees and expenses for period between filing of Section 12A application and approval/handing over.Analysis: Regulation 30A(2)(a) refers to estimated expenses till date of filing, while Regulation 30A(7) expressly provides for deposit towards actual expenses incurred till the date of approval by the Adjudicating Authority as determined by the interim resolution professional or resolution professional. The Explanation to Regulation 34 read with Regulation 31(d) includes fees payable to the resolution professional within insolvency resolution process costs. The Resolution Professional remains duty bound to manage the corporate debtor until handover, and Regulation 30A(7) contemplates payment of actual expenses up to the date of approval of the withdrawal application.Conclusion: The Resolution Professional is entitled to fees and expenses for the period after filing of the Section 12A application up to the date of approval by the Adjudicating Authority and handover.Issue (ii): Competence of the Adjudicating Authority to fix or reduce the fee of the Resolution Professional without CoC recommendation.Analysis: Regulation 34 assigns to the committee of creditors the function of fixing expenses to be incurred on or by the resolution professional, and Regulation 33 gives the Adjudicating Authority power to fix expenses only where the applicant has not fixed expenses under Regulation 33(1). Regulation 34B and Schedule-II set fee frameworks but do not confer a general power on the Adjudicating Authority to alter CoC-decided fees. The tribunal found no provision empowering the Adjudicating Authority to independently fix, enhance or reduce the fee except in the limited situation specified in Regulation 33.Conclusion: The Adjudicating Authority does not have jurisdiction to fix or further reduce the fee of the Resolution Professional without the recommendation or decision of the committee of creditors, except in the specific circumstance where the applicant failed to fix expenses under Regulation 33.Final Conclusion: The appeal is allowed; the Impugned Order reducing the Resolution Professional's fee is set aside and the matter is remanded to the Adjudicating Authority for fresh decision in accordance with law, recognising that fees and expenses are payable up to the date of approval of the withdrawal application and that fee fixation is primarily the prerogative of the committee of creditors.Ratio Decidendi: Regulation 30A(7) of the CIRP Regulations requires payment of actual expenses incurred up to the date of approval of a withdrawal application, and Regulation 34 vests primary authority to fix resolution professional fees with the committee of creditors, limiting the Adjudicating Authority's power to circumstances specified in Regulation 33.