Liquidator’s Fee Payable Only on Asset Realisation or Distribution: Fixed Monthly Remuneration Barred Without CoC or SCC Approval
- REEDLAW
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REEDLAW Legal News Network reports: In a significant ruling clarifying the statutory framework governing liquidation costs, the Appellate Tribunal held that a liquidator is not entitled to claim any fixed monthly remuneration in the absence of approval by the competent stakeholder bodies. Interpreting Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016, the Tribunal reaffirmed that liquidator’s fees are strictly outcome-based and become payable only upon actual realisation or distribution of assets during the liquidation process.
While adjudicating a company appeal along with connected interlocutory applications, the National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), examined the scope of Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016. It was held that, in the absence of any approval by the Committee of Creditors or the Stakeholders’ Consultation Committee, the liquidator could not claim a fixed monthly remuneration. The Tribunal emphasised that the regulatory scheme permits payment of liquidator’s fees only as a prescribed percentage of the amounts actually realised or distributed, and where no such realisation or distribution occurred, no fee became payable.
The Appellate Tribunal had first considered the interlocutory applications seeking condonation of delay in filing and refiling the appeal and, upon being satisfied that sufficient cause had been shown, condoned the delays and disposed of the applications accordingly. The appeal was thereafter taken up on merits, having been filed by the Appellant in the capacity of Liquidator, challenging the order of the Adjudicating Authority by which the application seeking fixation and payment of a monthly fee of Rs. 2.5 lakhs, along with other consequential reliefs, had been rejected.
It was contended on behalf of the Appellant that a proposal for payment of fee had been placed before the Stakeholders’ Consultation Committee but had not been approved, and that the assets of the Corporate Debtor had been attached by the Directorate of Enforcement prior to commencement of the CIRP. It was argued that the Appellant had taken steps for the revocation of such attachment and was therefore entitled to remuneration in terms of Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016. The Tribunal noted, however, that it was an admitted position that neither the Stakeholders’ Consultation Committee nor the Committee of Creditors had approved any fixed fee for the Liquidator.
On a conjoint reading of Regulation 4 of the Liquidation Regulations, the Tribunal held that the case of the Appellant, at best, fell within Regulation 4(2)(b), which entitled a liquidator to fees calculated as a percentage of the amount realised or distributed, net of other liquidation costs. The Tribunal found it undisputed that the Appellant had neither realised any assets nor distributed any amount to stakeholders. In the absence of any realisation or distribution, the statutory precondition for claiming remuneration under Regulation 4(2)(b) was not satisfied, and therefore no entitlement to fees arose.
The Tribunal further rejected the submission that the Appellant was entitled to a fixed fee merely because the Adjudicating Authority had appointed him instead of the liquidator recommended by the Committee of Creditors. It endorsed the finding of the Adjudicating Authority that since the Committee of Creditors had not fixed the Liquidator’s remuneration at the time of recommending liquidation under Section 33 of the Code, and the Stakeholders’ Consultation Committee had also failed to fix the fee in its first meeting as required under Regulation 4(1A), the Liquidator’s remuneration was necessarily governed by Regulation 4(2) alone. In view of these undisputed facts and the clear statutory scheme, the Tribunal held that no error had been committed by the Adjudicating Authority in rejecting the application for fixation of a monthly fee, found no merit in the appeal, and dismissed the same.
Mr. Rishabh Banerjee, Advocate, represented the Appellant.
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