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2020 (9) TMI 306
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....ional (IRP) and the appointment of the IRP as Resolution Professional (RP) was also continued by the Committee of Creditors (CoC) after its constitution. In the circumstance, the Applicant continued to act as RP as well of the Corporate Debtor. In the absence of any Resolution Plan, based on the decision of the CoC dated 27.07.2018 and consequent thereto, in an Application moved in MA/344/2018 this Tribunal on 20.09.2018 had ordered for liquidation of the Corporate Debtor and appointed the Applicant as the Liquidator in relation to the affairs and assets of the Corporate Debtor and its averred it is being administered as a going concern by the Liquidator as of date. 3. Since a Director of the Corporate Debtor was aggrieved by the Order of liquidation order passed by this Tribunal, an Appeal was filed before the Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 696 of 2018 and the Hon'ble NCLAT was pleased to dispose of the Appeal with an observation to the Liquidator to proceed in terms of its decision rendered in Y. Sivaram Prasad -vs- S. Dhanapal and others (Company Appeal (AT) (Insolvency) No. 224 of 2018). Subsequent to the Order in the Appeal, the Scheme for Com....
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.... subsequent to the Order of liquidation, in case of a Scheme being placed, the same is required to be treated as a sale of Corporate Debtor as a going concern under liquidation effectively to bring it within the ambit of the Regulations as it stood prior to 25.07.2019. In the circumstance, the Liquidator it is claimed is entitled to his fees calculated on the basis of both realization of Liquidation Estate and its assets on the transaction of sale as a going concern and as well as fees for the distribution of proceeds to be calculated as per the distribution time schedule filed along with the instant Application as Annexure-'A' in and by which a calculation of the Liquidator's fees is annexed along with the typed set. 6. It is also brought to the notice of this Tribunal in this Application that in view of the Scheme providing for the Liquidator's fees to be decided and approved by the IBBI, despite communications addressed to the IBBI by the Applicant, however, the Liquidator was made to understand by IBBI that the IBBI is only a Regulator and not a Judicial Authority in relation to the issue on hand and in the circumstance the issues raised by the Applicant/Liqu....
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....n in relation to the provision of liquidation fees and the payment to be made of the CIRP cost as ratified as well the liquidation cost including his fees to be given in priority in payment and upon approval of the Scheme to be paid within 30 days of the same as sought for in the instant Application under consideration. 11. A perusal of the said Written Submissions of the scheme proponents reveals that the Scheme Proponent has dealt in detail not only in relation to the Liquidator's fees and liquidation cost payable to the Applicant but as well as other issues which has been raised by the Liquidator in his report dated 24.01.2020 filed pursuant to the directions of this Tribunal dated 10.01.2020 and which observations has invited a scathing rebuttal on the part of the Scheme Proponent. Be that as it may, this Tribunal is not concerned with all those objections as projected by the Scheme Proponents in view of the submissions made by the Ld. Counsel for the Liquidator as well as the Liquidator that the observations made otherwise than in relation to the liquidation cost and fees and the duration of its payment as given in the Scheme is not being pressed and required to be esch....
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....Proponents, did not contemplate under the relevant Regulations namely, IBBI {Insolvency Resolution Process for Corporate Persons) Regulations, 2016 as well as IBBI (Liquidation Process) Regulations, 2016 for any fees to be paid to the Liquidator in case of a Scheme being placed at the time when the order of liquidation was passed. Under the circumstance the Scheme as placed before this Tribunal for its sanction was carved out due to judicial precedent established by the Hon'ble NCLAT. In this connection, it is also highlighted by the Ld. Counsel for the Scheme Proponents as well as the Counsel for the Liquidator that only on and from 25.07.2019 by virtue of amendment made to the Regulations namely, IBBI {Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and IBBI (Liquidation Process) Regulations, 2016; IBBI has sought to amend these Regulations in relation to the fees payable to the Liquidator in case a Scheme being propounded and placed before this Tribunal, subsequent to the order of liquidation. 16. In the circumstance, it is also brought to the notice of this Tribunal that the Regulations as it stood un-amended prior to amendment of the Regulations m....
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....quired to be looked into by this Tribunal is the law as it was in existence prior to the amendment to the Regulations of both the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and IBBI (Liquidation Process) Regulations, 2016 by the IBBI made effective from 25.07.2019. However, for a better appreciation of the position in relation to Liquidation cost and fees, subsequent to amendment effective from 25.07.2019, in the case of a Scheme being placed will also be to the limited extent, for sake of clarity, will be relevant. Hence the relevant provisions pre and post amendment made effective from 25.07.2019 for the said purpose is extracted as below: firstly prior to the amendment of the Regulations made effective from 25.07.2019 and subsequently that of the amended Regulations upon amendment to the Regulations made effective on and from 25.07.2019 by IBBI. PRE AMENDMENT POSITION OF THE IBBI (IRCP) REGULATIONS, 2016 AND IBBI (LIQUIDATION PROCESS) REGULATIONS, 2016 AS WELL AS THE RELEVANT PROVISIONS OF IBC, 2016: - 19. The judicial precedents as laid down in S.C. Sekaran's case as well as Y. Sivaram Prasad's case it must be noted is only in rei....
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.... (b) remuneration payable by the liquidator under regulation 7; (c) cost incurred by the liquidator under regulation 24; and (d) interest on interim finance for a period of twelve months or for the period from the liquidation commencement date till repayment of interim finance, whichever is lower; 4. Liquidator's fee. (1) The fee payable to the liquidator shall form part of the liquidation cost. (2) The liquidator shall be entitled to such fee and in such manner as has been decided by the committee of creditors before a liquidation order is passed under sections 33(1)(a) or 33(2). (3) In all cases other than those covered under sub-regulation (2), the liquidator shall be entitled to a fee as a percentage of the amount realized net of other liquidation costs, and of the amount distributed, as under: (4) The liquidator shall be entitled to receive half of the fee payable on realization under sub-regulation (3) only after such realized amount is distributed. 21. A Combined reading of Regulation 2(ea) read with Regulation 4 of IBBI (Liquidation Process) Regulations, 2016 shows that the fees of the Liquidator can be....
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....n the present instance, namely Section 5(18) of IBC, 2016 extracted above as well, has omitted to contemplate a situation in terms of the amendment carried in relation to Section 230 of the Companies Act 2013 by virtue of the Eleventh schedule to IBC, 2016 as already discussed in paragraph supra. In the circumstances, even though there has been no omission on the part of the legislature while enacting the statute, namely IBC, 2016, however on the part of the Regulator there obviously seems to be a case of 'casus omissus' which it is submitted by the Scheme Proponents is to be filled in by this Tribunal as there cannot be an outstanding issue in relation to the fees of the Liquidator and 'the Liquidator cannot be left high and dry in relation to fees chargeable by him under the Regulation 4 of IBBI (Liquidation Process) Regulations as it stood prior to amendment which never contemplated within its ambit of a Scheme being placed after Liquidation. Hence in order to resolve this issue it is submitted that the amended Regulations for the limited purpose of fixing the Liquidator's fees can be considered as a way of filling the gaps left by the Regulator pre-amendment and....
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....en by the committee of creditors under regulation 39D of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (2) In cases other than those covered under sub-regulation (1), the liquidator shall be entitled to a fee- (a) at the same rate as the resolution professional was entitled to during the corporate insolvency resolution process, for the period of compromise or arrangement under section 230 of the Companies Act, 2013 (18 of 2013); and (b) as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation, as under: (3) Where the fee is payable under clause (b) of sub-regulation (2), the liquidator shall be entitled to receive half of the fee payable on realisation only after such realised amount is distributed. Clarification: Regulation 4 of these regulations, as it stood before the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 shall continue to be applicable in relation to the liquidation processes already commenced before the com....
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.... (3) The resolution professional shall submit the recommendation of the committee under sub-regulations (1) and (2) to the Adjudicating Authority while filing the approval or decision of the committee under section 30 or 33, as the case may be." 39D. Fee of the liquidator While approving a resolution plan under section 30 or deciding to liquidate the corporate debtor under section 33, the committee may, in consultation with the resolution professional, fix the fee payable to the liquidator, if an order for liquidation is passed under section 33, for - (a) the period, if any, used for compromise or arrangement under section 230 of the Companies Act, 2013; (b) the period, if any, used for sale under clauses (e) and (f) of regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016; and (c) the balance period of liquidation. 25. A collective reading of the amended Regulations as extracted of both IRCP Regulations and Liquidation Process Regulations, 2016 brings to the fore the contention of the Scheme Proponents that in order to fill the gaps, the amended Regulations can be, in effect, for th....
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....pter (Reconstruction) is concerned is the looseness of English legal terminology in this area. The operations are variously described as reductions, reconstruction, reorganizations, scheme of arrangement, amalgamations, mergers, de-mergers, buy outs, etc. But none of those expressions is a term of art with a clearly defined meaning distinguishing one such transaction from another." 27. Thus the word 'reconstruction' which takes within its sweep both internal as well as external reconstruction is of a very wide amplitude encompassing within itself, the schemes contemplated by way of compromise or arrangement under section 230 of the Companies Act, 2013. However it fails to offer any precise solution as to whether the restructuring exercise contemplated by the scheme proponents can be brought under the definition of any of the modes of 'Sale' as contemplated under Regulation 32 of Liquidation Process Regulations as framed by the IBBI and in its absence, as to whether it is permissible for the liquidator to claim a percentage of fees both on realization of proceeds and its distribution. Again referring to the book authored by Mr. K.R. Sampath, Advocate Solicitor, Su....
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....However, eventhough the amended Regulation 4 of the Liquidation Process Regulations 2016 draws a distinction in this connection in the event of a scheme proposed and as well as in its absence as repeatedly brought forth in the earlier portion, no such distinction or for that matter no specific mention has been made in relation to a scheme and in relation to the fees payable to the Liquidator under the concerned Regulations pre-amendment. The Regulator, namely, IBBI seems to have been fully conscious inter alia of the said situation, however in this connection has chose to issue a clarification at the foot of the Regulation 4 itself as it stood amended on and from 25.07.2019 to the following effect; Clarification: Regulation 4 of these regulations, as it stood before the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 shall continue to be applicable in relation to the liquidation processes already commenced before the coming into force of the said amendment Regulations. 29. Thus, this Tribunal is required to only apply in relation to ascertaining the amount of fees payable to the Liquidator, the unamended R....
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....pted to be given only in light of sale transactions as contemplated under Regulation 32 of the Liquidation Process Regulations, 2016. 31. Thus, in view of the clarifications and also taking into consideration the Scheme per se as propounded by the Scheme proponents itself, applying Regulation 4 of Liquidation Process Regulations, 2016 as it stood prior to amendment made w.e.f. 25.07.2019, we find that the calculation as given by the Liquidator in the typed set filed along with the application which tabulation has also been extracted in para 22 supra is sustainable and in the absence of committee of creditors fixing the fees of the Liquidator or the Liquidation costs, is required to be hence allowed. 32. However, in relation to the Liquidation costs, other than the fees which is payable to the Liquidator is required to be defrayed by the Scheme proponents based on actual expenses incurred by the Liquidator and upon the Liquidator furnishing sufficient proof along with vouchers for having incurred such expenditure. Eventhough Regulation 4 of the Liquidation Process Regulations, 2016 is silent in this regard pre-amendment, post amendment to Regulation 4 of the Liquidation Proces....
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....Liquidation process of the Corporate Debtor/Company in Liquidation stands revoked for the time being to enable the Corporate Debtor/Company in Liquidation to revive and reconstruct by implementing the Scheme sanctioned in terms of the order dated 10.01.2020 and carry forward its business activity/undertaking in terms of the Scheme by the Scheme proponents. 36. Accordingly, with the above directions, this Application stands disposed of. ============= Document 1 Amount of Realisation / Distribution Percentage of fee on the amount realized / distributed in the first in the next six in the next Thereafter (In rupees) six months months one year Amount of Realisation (exclusive of liquidation costs) On the first 1 5.00 3.75 2.50 1.88 crore On the next 9 3.75 2.80 1.88 1.41 crore On the next 40 2.50 1.88 1.25 0.94 crore On the next 50 1.25 0.94 0.68 0.51 crore On further 0.25 0.19 0.13 0.10 sums realized Amount Distributed to Stakeholders On the first 1 2.50 1.88 1.25 0.94 crore On the next 9 1.88 1.40 0.94 0.71 crore On ....