TaxTMI 
TaxTMI 
2023 (2) TMI 900
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....esolution Professional ("IRP" in short) the total costs of Rs.5,62,000/- which was incurred by the IRP in the discharge of his duties. Aggrieved by this impugned order, the present appeal has been preferred. 2. The factual matrix of the present case as briefly put forth by the Learned Counsel for the Appellant is that a Section 9 petition was admitted against Tarang Exports Private Limited, the Corporate Debtor by the Adjudicating Authority vide its order dated 17.02.2020, subsequently modified vide corrigendum dated 24.02.2020. Since the Operational Creditor/Appellant while filing the Section 9 application did not propose the name of the IRP, hence the Adjudicating Authority while bringing the Corporate Debtor under the rigours of CIRP appointed the IRP. Accordingly, the Operational Creditor/Appellant, through legal counsel, intimated the IRP vide email dated 09.03.2020 regarding his appointment. 3. It was further submitted that following his appointment, the IRP had issued a public announcement on 11.03.2020. It has been submitted by the Learned Counsel for the Appellant that soon thereafter Covid-19 pandemic made ingress and because of the consequential lock-down, the Operatio....
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....ant. Secondly, it was passed in violation of Rule 150 of NCLT Rules as it was not pronounced in the open court. Thirdly, the impugned order does not contain reasons for allowing the fees and expenses claimed by the IRP. The Learned Counsel for the Appellant strenuously contended about dereliction of duty on the part of IRP and stated that the Appellant was, therefore, not obligated to reimburse the IRP for his fees/expenses. 6. It has been further submitted that the IRP had failed to disclose the detailed item wise break-up of the fees and expenses claimed by him which is required in terms of the Code of Conduct in terms of the IBBI (Insolvency Professionals) Regulations, 2016 and Regulation 34-A of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 ("CIRP Regulation" in short). It has also been pointed out that the fees charged by the IRP is exorbitant. 7. The Learned Counsel for the Respondent making the rival submissions stated that on receipt of email dated 09.03.2020 from the Operational Creditor regarding his appointment as IRP, he sought the contact details of the Operational Creditor and sought information from ....
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....o, whether it is incumbent upon the Operational Creditor/Respondent to bear such fees/expenses subject to their being reasonable. 11. To begin with, we may start by going through the relevant provisions of the IBC Code, IBBI (Insolvency Professionals) Regulations, 2016 and CIRP Regulations, 2016: - "Section 5(13) of IBC reads as under: (13) Insolvency Resolution Process Costs" means - (a) the amount of any interim finance and the costs incurred in raising such finance; (b) the fees payable to any person acting as a resolution professional; (c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern; (d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and (e) any other costs as may be specified by the Board; Section 208(2) reads as under: 208. (2) Every insolvency professional shall abide by the following code of conduct: - (a) to take reasonable care and diligence while performing his duties; (b) to comply with all requirements and terms and conditions specified in the byelaws of the insolvency professional agency of which he is a member; (c) to....
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....ratorium imposed under section 14(1)(d); (c) expenses incurred on or by the interim resolution professional to the extent ratified under Regulation 33; (d) expenses incurred on or by the resolution professional fixed under Regulation 34; and (e) other costs directly relating to the corporate insolvency resolution process and approved by the committee. Costs of the interim resolution professional. 33. (1) The applicant shall fix the expenses to be incurred on or by the interim resolution professional. (2) The Adjudicating Authority shall fix expenses where the applicant has not fixed expenses under sub-regulation (1). (3) The applicant shall bear the expenses which shall be reimbursed by the committee to the extent it ratifies. (4) The amount of expenses ratified by the committee shall be treated as insolvency resolution process costs. Explanation. - For the purposes of this regulation, "expenses" include the fee to be paid to the interim resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals, if any, and other expenses to be incurred by the interim resolution professional. Resolution professional co....
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.... the contact details of the Operational Creditor and also sent a communication to suspended management requesting other related particulars, documents and books of accounts of the Corporate Debtor so as to effectively conduct the CIRP and manage the affairs of the Corporate Debtor. Neither the Operational Creditor nor the suspended management had provided access to the books of accounts, financial statement, bank account details or any other related information to the IRP. It is also noticed that the Operational Creditor was not in contact directly with the IRP. Instead, an advocate Mr. Saurabh Pandya was seeking status of CIRP from IRP without any authorisation from the Operational Creditor. The IRP had clarified that he was not bound to respond to mails to Mr. Pandya in absence of receipt of any authority letter from the Operational Creditor. 14. We notice that the IRP continued with his efforts to obtain information and in terms of Sections 13 and 15 of IBC had also taken steps to issue public announcement in two newspapers. The issue of public announcement has not been controverted by the Appellant. It is also the claim of the IRP that the details of the public announcements w....
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....editors to play a catalytic role in the insolvency resolution process given the present regime of creditor-driven IBC. The rigours of similar standards of discipline should also apply on the creditors. This is clearly a case where the CIRP process was being hindered due to want of cooperation and participation from the creditors. The conduct of the Operational Creditor in the present case is deprecatory in that once the CIRP process had commenced, the Operational Creditor went into a sleeping mode. This position has been further aggravated by the fact that it was the Appellant/Operational Creditor who had triggered this judicial process and then abdicated himself from all responsibilities. That the Operational Creditor did not seem interested in resolution of the Corporate Debtor is evident from the fact that till date no claim has been filed with the IRP. 17. Further we are of the considered view that Section 217 of the IBC empowers any person aggrieved by the functioning of a Resolution Professional to file a complaint before the IBBI. The Operational Creditor was at liberty to report any dereliction of duty on the part of the IRP and that not having been done, the denial to pay....
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....in a transparent manner and that he claimed disproportionately high fees as compared to the limited work undertaken by him having only issued the public announcement. Attention was also adverted to circular of IBBI dated 21.06.2018 on fee and other expenses incurred for Corporate Insolvency Resolution Process and the need of fees having to meet the reasonability quotient which is as reproduced hereunder: CIRCULAR No. IBBI/IP/013/2018 12th June, 2018 To All Registered Insolvency Professionals All Recognised Insolvency Professional Entities All Registered Insolvency Professional Agencies (By mail to registered email addresses and on website of the IBBI) Dear Madam / Sir, Sub : Fee and other Expenses incurred for Corporate Insolvency Resolution Process When a corporate debtor undergoes corporate insolvency resolution process (CIRP), an Insolvency Professional (IP) is vested with the management of its affairs and he manages its operations as a going concern. He complies with the applicable laws on behalf of the corporate debtor. He conducts the entire CIRP. Such responsibilities of an IP require the highest level of professional excellence, dexterity and integrit....
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....o incur any fee or other expense are maintained; (e) supporting records of fee and other expenses incurred are maintained at least for three years from the completion of the CIRP; (f) approval of the Committee of Creditors (CoC) for the fee or other expense is obtained, wherever approval is required; and (g) all CIRP related fee and other expenses are paid through banking channel. 7. The Code read with regulations made thereunder specify what is included in the insolvency resolution process cost (IRPC). The IP is directed to ensure that:- (a) no fee or expense other than what is permitted under the Code read with regulations made thereunder is included in the IRPC; (b) no fee or expense other than the IRPC incurred by the IP is borne by the corporate debtor; and (c) only the IRPC, to the extent not paid during the CIRP from the internal sources of the Corporate Debtor, shall be met in the manner provided in section 30 or section 53, as the case may be. 8. It is clarified that the IRPC shall not include: (a) any fee or other expense not directly related to CIRP; (b) any fee or other expense beyond the amount approved by CoC, where such approval is required; (c)....
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....nsolvency Practitioners of India, in its statement of best practices on "PAYMENT OF CORPORATE INSOLVENCY RESOLUTION PROCESS COSTS" observes: "Insolvency professionals must ensure that the costs incurred are reasonable. To determine the reasonability of these costs, they should consider if the costs are- (a) directly related to the insolvency resolution process, (b) necessary for meeting the objectives of the insolvency resolution process, and the Code, (c) proportional to the work required to be done and the assets of the corporate debtor, and (d) determined on an arms' length basis, in consonance with the requirements of integrity and independence." [http://www.insolindia.com/uploads_insol/draft_best_practices/files/-1013.pdf] II. As regards reasonable fee, the Society for Insolvency Practitioners of India, in its statement of best practices on "PAYMENT OF FEE AND REIMBURSEMENT OF OUT-OF-POCKET EXPENSES" suggests: "Factors to be considered while charging fee (i) An insolvency professional may charge a fixed or variable fee to reasonably remunerate him/her for the work that he/she necessarily and properly undertakes for an appointment under the Code. In determinin....
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....ugned order has simply endorsed the CIRP cost claimed by the IRP and directed the Operational Creditor to reimburse the total costs of Rs. 5,62,000/- without analysing whether the claim made was proportionate to the work done and the reasonableness of the claim. It has been further submitted that the IRP has not provided any supporting bills to substantiate his claim of expenses and that the fees charged were therefore not transparent. It is pertinent to add here that during oral hearing when the Learned Counsel for the Operational Creditor was pointedly asked by this Tribunal to indicate what to their mind in the present case constituted reasonable fees, it was stated that any amount beyond Rs.50,000/- would become excessive. An opportunity was also offered to the IRP to submit detailed break-up of expenditure incurred along with bills to which the Learned Counsel for the IRP submitted that this Tribunal may take a considered view on the reasonable quantum of fees. 21. To dwell on the reasonability aspect, we may first take note of the details of duties carried out and corresponding expenditure incurred as claimed by the IRP before the Adjudicating Authority which is as extracted....