TaxTMI 
TaxTMI 
2023 (12) TMI 444
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....ssary to be noticed for deciding the Appeal are: (i) Liquidation process of the Corporate Debtor - M/s Barcle Enterprises Limited commenced by an order dated 24.01.2022. The Appellant was appointed as a Liquidator of the Corporate Debtor in terms of Section 33, sub-section (2) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code"). (ii) The Respondent - Radhasiriya Properties Pvt. Ltd. sent an intimation to the Liquidator, expressing its interest in submitting a scheme of compromise and arrangement. On 15.03.2022, Respondent No.1 submitted its scheme to the Liquidator. After certain correspondence, the Liquidator accepted the scheme on 12.05.2022 and I.A. (IB) No.495/KB/2022 was filed by the Liquidator before the Adjudicating Authority seeking a direction to the Liquidator to conduct a meeting of the Creditors under Regulation 2B of the IBBI (Liquidation Process) Regulation, 2016 (hereinafter referred to as the "Liquidation Regulations, 2016") read with Section 230(1) of the Companies Act, 2013. (iii) The Liquidator sent different emails to the Proponent of the Scheme demanding various amounts from Respondent to be paid. Certain amounts were paid ....
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....wing the Application filed by the Respondent. The Adjudicating Authority in the impugned order held that Liquidator is not entitled to receive any fee. It was held by the Adjudicating Authority that since the Scheme was rejected, the liquidation cost including liquidation fee was wrongly claimed by the Liquidator from the Scheme Proponent, i.e., Respondent. The Adjudicating Authority, consequently directed the Liquidator to refund the entire amount of Rs.23,88,280/-. Aggrieved by which order this Appeal has been filed. 3. We have heard Shri Anoop Prakash Awasthi, learned Counsel appearing for the Appellant and Ms. Swati Dalmia, learned Counsel appearing for the Respondent. 4. The learned Counsel appearing for the Appellant challenging the impugned order submits that the Appellant charged fee for the period from 15.03.2022 to 17.02.2023 as per the provisions of Regulation 4(2)(a) read with Proviso to Regulation 2B(3) of the Liquidation Regulations, 2016. It is contended that Regulation 2B has been prepared to balance the equity to encourage only the serious proposals of compromise or arrangement and hence, the time taken, is taken outside the liquidation period and where compromi....
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....ion of learned Counsel for the parties and have perused the records. 7. The facts and sequence of events between the parties have been noted by the Adjudicating Authority in its impugned order, which needs no repetition. It is admitted fact between the parties that the Respondent, who has proposed the scheme of compromise and arrangement dated 15.03.2022 was required by the Liquidator to pay various amounts from time to time and total amount paid by the Respondent was an amount of Rs.23,88,280/-, for refund of which amount an I.A. (IB) No.975/KB/2023 was filed, which was allowed by the Adjudicating Authority. The Liquidator has filed the reply to the I.A. (IB) No.975/KB/2023, where it has given the details of amount, which according to the Liquidator, the Respondent was liable to pay. It is useful to extract paragraph 14 of the reply, which contain all details regarding liquidation fee and the expenses as was claimed by the Liquidator. Paragraph 14 of the reply of the Liquidator is as follows: Particulars Amount (Rs.) Liquidator's fee for 13 months (Jan 2022- Feb 2023) 23,01,000 Publication of Form B for initiation of liquidation 5,376 Drafting and Filing fee for IA 409/20....
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.... of the liquidation process, including payment of fee and costs. Regulation 2(1)(ea) defines the 'liquidation cost', which is to the following effect: "2(1)(ea) "liquidation cost" under clause (16) of section 5 means- (i) fee payable to the liquidator under regulation 4; (ii) remuneration payable by the liquidator under subregulation (1) of regulation 7; (iii) costs incurred by the liquidator under subregulation (2) of regulation 24; (iv) costs incurred by the liquidator for preserving and protecting the assets, properties, effects and actionable claims, including secured assets, of the corporate debtor; (v) costs incurred by the liquidator in carrying on the business of the corporate debtor as a going concern; (vi) 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; (vii) the amount repayable to contributories under sub regulation (3) of regulation 2A; (viii) any other cost incurred by the liquidator which is essential for completing the liquidation process: Provided that the cost, if any, incurred by the liquidator in relation to compromi....
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.... or arrangement and if such compromise or arrangement is sanctioned by the Tribunal by an order, the same shall be binding on the company, all the creditors, or class of creditors or members or class of members, as the case may be, or, in case of a company being wound up, on the liquidator and the contributories of the company." 13. Regulation 4 of Liquidation Regulations, 2016, deals with 'Liquidator's fee'. Regulation 4, sub-section (2), which is relevant for the present case, is as follows: "4(2) In cases other than those covered under subregulation (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: Amount of Realisation/ Distribution (In Rupees) Percentage of fee on the amount realized/ distributed in the first six months in the next six months thereafter On the first 1 crore 5.00 ....
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....ers to cost incurred by the Liquidator. Regulation 2B, does not include fee. Regulation 4 of Liquidation Regulations, 2016 deals with fee. Thus, the Rule making Authority is fully aware of the difference between the cost and fee. Regulation 2B does not indicate that any fee by Liquidator can be charged from the Scheme Proponent. The Liquidator is entitled to his fee as per the statutory provision of Section 34, sub-section (8) and (9) as noted above read with Regulation 4 of Liquidation Regulations, 2016. No fee can be charged from the Scheme Proponent, who has submitted the Scheme under Section 230 of the Companies Act, 2013 read with Regulation 2B of Liquidation Regulations, 2016. Thus, the insistence of Liquidator and defense taken by the Liquidator in reply to I.A. (IB) No.975/KB/2023 that he is entitled to fee of Rs.23,01,000/- is wholly erroneous and unsupported by any statutory scheme. 18. The learned Counsel for the Appellant contended that in event the Scheme Proponent is not saddled with liquidation fee and cost, non-serious Scheme Proponent will be encouraged and shall be wasting time of the liquidation. The consideration of the scheme submitted by a Scheme Proponent fo....
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.... Liquidator to the Respondent wherein in paragraphs 3, 4 and 5, following has been stated: 3. In Para 9.4 of the scheme submitted by you, you have indicated the final shareholding pattern of the Corporate Debtor after implementation of the scheme. However, you have not indicated the treatment of the existing shares of the Corporate Debtor, i.e. whether the existing shares will be transferred to you, or will they be extinguished and you shall be issued new shares. Request you to clarify the same in the same undertaking as required in Para (1) of this email. 4. You have already paid Rs.7,88,280 pertaining to the liquidation costs and fee of the liquidator for the anticipated 90 day period of the scheme of compromise and arrangement. However, since the scheme is taking longer to be approved by the Adjudicating Authority, we call upon you to contribute the fee of the liquidator for the period 24.05.2022 - 23.09.2022 as indicated in regulation 4(2)(a) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 ("Liquidation Regulations") @ Rs.1.50 lacs per month plus GST amounting to Rs.7.08 lacs. 5. As discussed in our mail dt. 21.03.2022, in complia....