TaxTMI 
TaxTMI 
2026 (5) TMI 1238
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....r Relan, who was subsequently appointed as the Resolution Professional ("RP") of the Corporate Debtor in the place of Appellant, and against Respondent No. 2, namely the Committee of Creditors ("CoC") of M/s Shri Tradco Deesan Private Limited through State Bank of India, regarding payment of professional fees and reimbursement of expenses incurred by the Appellant during the Corporate Insolvency Resolution Process ("CIRP"). 2. The dispute in the present appeal arises from the grievance of the Appellant that despite discharging various statutory duties as IRP throughout the CIRP period, including during the period when this Appellate Tribunal had stayed the constitution of the CoC, the CoC/Respondent No. 2 refused to ratify and pay his professional fees for a substantial duration and further arbitrarily reduced the agreed fee structure. The Appellant has therefore filed this appeal contending that the Adjudicating Authority failed to grant him fees in accordance with the agreed remuneration as well as the minimum fee structure prescribed under Regulation 34B read with Schedule II of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)....
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....also contended by the representatives of SBI that the Appellant should charge only the minimum fee prescribed under Schedule II of the CIRP Regulations, namely INR 2,00,000/- per month. The Appellant, however, clarified that the fee of INR 2,50,000/- per month had already been agreed between SBI and the Appellant at the time his name was proposed as IRP in Part III of Form-1 and further explained that the fee prescribed under Schedule II was only a minimum benchmark and not a ceiling restricting higher agreed remuneration. (v) Subsequently, the application seeking replacement of the Appellant as Resolution Professional was allowed by the Adjudicating Authority through order dated 26.10.2023, whereby Respondent No. 1 came to be appointed as the Resolution Professional of the Corporate Debtor. Pursuant thereto, the Appellant formally handed over charge and records of the Corporate Debtor to Respondent No. 1 on 04.11.2023. (vi) In the third CoC meeting held on 30.11.2023, the CoC ratified the Appellant's fees only partially. The CoC approved payment of INR 1,25,000/- for the period from 15.02.2023 to 28.02.2023, INR 2,00,000/- for September 2023, INR 2,00,000/- for O....
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....editor to reimburse the fees of the Appellant for the period from 28.02.2023 to 01.09.2023 at the rate of INR 50,000/- per month on a pro-rata basis and also permitted reimbursement of actual expenses incurred by the Appellant subject to verification. However, the Adjudicating Authority did not accept the Appellant's claim for payment at the rate of INR 2,50,000/- per month or at least the minimum fee prescribed under Schedule II of the CIRP Regulations during the period of stay. Aggrieved by the same the Appellant has filed this appeal. SUBMISSIONS OF THE APPELLANT 4. Ld. Counsel for the Appellant submits that the Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor commenced pursuant to the Order dated 15.02.2023 passed under Section 7 of the Insolvency and Bankruptcy Code, 2016 and the Appellant was appointed as IRP. The said admission order was challenged before this Appellate Tribunal in Company Appeal (AT) (Ins.) No. 244 of 2023. While entertaining the said appeal, this Hon'ble Appellate Tribunal, vide Order dated 28.02.2023, directed that the appeal be listed for admission on 11.04.2023 and further directed that, in the meantime, the IRP shall ....
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.... stayed. The limited directions were issued only to facilitate settlement discussions between the parties and not to terminate or suspend the CIRP altogether. Therefore, the Appellant continued to discharge his statutory duties during the said period. 9. It is submitted that during the aforesaid period, the Appellant actively carried out the work of verification and collation of claims received from various creditors. The Appellant verified and collated claims exceeding Rs. 250 crores. This fact has also been specifically recorded by the Ld. Adjudicating Authority in Paragraph 6 of the impugned Order dated 07.10.2025. The Ld. Adjudicating Authority categorically observed that the stay granted by this Appellate Tribunal was limited only to the constitution of the CoC and that the IRP was permitted to continue the functions relating to verification and collation of claims. The Hon'ble Adjudicating Authority further recorded that, after publication of Form-A, the IRP received claims from four financial creditors aggregating to more than Rs. 250 crores and also received nine claims from operational creditors. The Hon'ble Adjudicating Authority therefore expressly held that it could ....
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....itors amounting to Rs. 10,34,94,352/-. Thus, the admitted claims of the Corporate Debtor were well within the bracket attracting the statutory minimum fee of Rs. 2,00,000/- per month under Regulation 34-B read with Schedule-II of the CIRP Regulations. In these circumstances, the direction of the Hon'ble Adjudicating Authority restricting the fees payable to the Appellant to only Rs. 50,000/- per month for the period from 28.02.2023 to 01.09.2023 is contrary to the mandatory statutory framework and therefore unsustainable in law. 14. It is further submitted that the CoC/Respondent No.2 had itself agreed to pay the Appellant fees at the rate of Rs. 2,50,000/- per month. The subsequent reduction of fees to Rs. 2,00,000/- per month was applicable only after the interim directions were vacated on 01.09.2023. Therefore, for the period from 01.03.2023 to 31.08.2023, the Appellant is entitled to fees at the rate of Rs. 2,50,000/- per month in terms of the resolutions passed by the CoC itself. The Ld. Adjudicating Authority failed to properly appreciate these material facts and consequently committed an error in reducing the fee payable to the Appellant. 15. It is submitted by the App....
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....d the insolvency proceedings in entirety. The Appellant was only restrained from constituting the CoC and from taking further steps except verification and collation of claims. Thus, the Appellant continued to perform statutory functions during the relevant period and the CIRP itself remained operational. (c) It is further submitted that in the judgment relied upon by Respondent No.2, the dispute pertained to the fees of the Resolution Professional after constitution of the CoC, whereas in the present case the dispute concerns the fees payable to the IRP during the stage of verification and collation of claims prior to constitution of the CoC. In the present case, the Appellant demonstrably performed substantial work relating to claim verification and collation, which has already been acknowledged by the Hon'ble Adjudicating Authority in the impugned order itself. Therefore, the ratio of the aforesaid judgment cannot be mechanically applied to the facts of the present case. Ld. Counsel therefore submitted that the judgment in IndusInd Bank Ltd. v. Rajendra K. Bhuta is clearly distinguishable both on facts and on law and cannot be relied upon to deny the legitimate fees ....
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....e Limited pursuant to the order dated 15.02.2023 passed by the Ld. Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy Code, 2016 admitting the Corporate Debtor into Corporate Insolvency Resolution Process ("CIRP"). It was submitted that thereafter the admission order itself came to be challenged before this Appellate Tribunal by the Corporate Debtor. This Appellate Tribunal, vide order dated 28.02.2023 passed in Company Appeal (AT) (Insolvency) No. 244 of 2023, granted interim protection by directing the IRP not to constitute the Committee of Creditors and not to take further steps except collation and verification of claims. 23. Ld. Counsel submits that the Appellant is now deliberately attempting to take undue advantage of the wording of the order dated 28.02.2023 by contending that since there was no express stay of CIRP proceedings, he continued to remain entitled to full fees during the entire period from 01.03.2023 to 31.08.2023. Learned counsel submitted that such interpretation is wholly artificial and contrary to the practical and legal effect of the interim order passed by this Hon'ble Tribunal. It was submitted that once constitution of the CoC wa....
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....lly recorded in the minutes that the period between 01.03.2023 to 31.08.2023 was covered by the stay order passed by this Hon'ble Appellate Tribunal on constitution of the CoC. Learned counsel submitted that the CoC thus took a conscious commercial decision not to approve fees for the stay period, since no effective CIRP functions were carried out during that time. 27. Ld. Counsel further submitted that the Appellant's fees were also re- adjusted from Rs. 2,50,000/- per month to Rs. 2,00,000/- per month in accordance with the CIRP Regulations and the size of claims collated in the present CIRP. It was argued that under the CIRP Regulations, the IRP may request a higher fee, but such higher fee is ultimately subject to approval of the Committee of Creditors. It was therefore submitted that the CoC was fully within its commercial wisdom and statutory authority in approving a fee of Rs. 2,00,000/- per month instead of Rs. 2,50,000/- per month. Learned counsel clarified that this re-adjustment was made only after constitution of the CoC and was thus a valid exercise of powers by the CoC under the CIRP framework. 28. He stated that thereafter the Appellant filed IA No. 4549/MB/202....
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....inimum fees when admittedly no substantial CIRP work was undertaken during the relevant period. Counsel emphasized that the Hon'ble NCLT had not reduced any fees already approved by the CoC; rather, it had granted an additional equitable amount despite there being no legal obligation to do so. 32. It was also submitted that the Appellant has failed to demonstrate any illegality, perversity or arbitrariness in the decision of the CoC approving fees at Rs. 2,00,000/- per month. Learned counsel submitted that Respondent No. 2 has already shown its willingness to comply with the directions passed by the Hon'ble NCLT and to pay Rs. 2,00,000/- per month for the period between 01.09.2023 to 26.10.2023, apart from the fees directed for the stay period and reimbursement of verified expenses. Counsel submitted that the conduct of the CoC throughout has been fair, transparent and fully compliant with the statutory framework. 33. Learned counsel further argued that the fees ratified by the CoC for the periods before and after the stay are just, reasonable and in accordance with settled law. It was submitted that several judicial precedents have consistently held that no fees are payable ....
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.... in the facts and circumstances of the case. Analysis and Findings 38. We have gone through the records of the case including the written submissions filed by the parties and heard the Ld. Counsels at length. 39. The present Appeal is confined only to the issue of fees payable to the Appellant during the period when the constitution of the CoC stood stayed by order dated 28.02.2023 passed by this Appellate Tribunal. The validity of the CIRP admission order or the appointment of the Appellant as IRP is not under challenge before us. 40. The limited issue for our consideration in this appeal is whether the Learned Adjudicating Authority was justified in directing payment of fees to the Appellant-IRP at the rate of Rs. 50,000/- per month for the period from 28.02.2023 to 01.09.2023, during which the constitution of the CoC remained stayed by this Appellate Tribunal or whether the Appellant is entitled to fees at the rate of Rs. 2,00,000/- or Rs. 2,50,000/- per month for the said period. 41. The only question here is whether the limited work performed during a restricted CIRP period would entitle the Appellant to claim full fees at the same rate as payable during a fully....
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....ubmits that Appellant shall endeavor to enter into settlement and try to liquidate the debt as per decision of the Bank. 2. Issue Notice. Learned Counsel for the Bank accepts notice and allowed three weeks ' time to file Reply. Appellant may also file Rejoinder within two weeks, thereafter. List this Appeal "For Admission" on 11th April, 2023. In the meantime, in pursuance of the Impugned Order, IRP shall not constitute the Committee of Creditors and he shall not take further steps except collation and verification of the claim." 46. A careful reading of the order dated 28.02.2023 passed by this Appellate Tribunal shows that the IRP was specifically restrained from constituting the CoC and from taking further steps in the CIRP except collation and verification of claims. Therefore, the IRP was permitted to take only the specific activity relating to collation and verification of claims. All further actions to be taken in the CIRP were stayed completely and the activities of the IRP stood drastically curtailed. 47. Under the normal course of CIRP, an IRP is expected to undertake various statutory and managerial functions including constitution of CoC, con....
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...., or with information utility or the depository of securities or any other registry that records the ownership of assets including- (i) assets over which the corporate debtor has ownership rights which may be located in a foreign country; (ii) assets that may or may not be in possession of the corporate debtor; (iii) tangible assets, whether movable or immovable; (iv) intangible assets including intellectual property; (v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assets subject to the determination of ownership by a court or authority; (g) to perform such other duties as may be specified by the Board. Explanation. -For the purposes of this 1[section], the term "assets" shall not include the following, namely: - (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as may be notified by the Central Government in consultat....
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.... time. As we note from the Section 20 of the Code, the main role of the IRP during the CIRP process is to keep the Corporate Debtor running as a going concern. Whereas in this case we note that the CD was being run by the existing management during the period of the stay. Clearly the role performed by the Appellant was extremely limited in comparison to the role of an IRP in normal CIRP proceedings. 52. The Appellant has relied upon Regulation 34-B and Schedule II of the CIRP Regulations. However, those provisions cannot be interpreted in isolation from the factual circumstances of the case. The purpose of prescribing minimum fees is to ensure reasonable professional compensation for functions performed during CIRP. Such provisions cannot be read to mean that the IRP becomes automatically entitled to full professional fees even during a period when the CIRP itself was functioning under substantial judicial restrictions and most statutory functions could not be undertaken. 53. Once this factual position is appreciated, the reasoning adopted by the Adjudicating Authority becomes clear. The Adjudicating Authority neither accepted the stand of the CoC that no fees were payable, n....