Interim Resolution Professional Cannot Claim Fees or Expenses During Stay of CIRP Proceedings: NCLT Bengaluru
- REEDLAW
- Oct 9
- 4 min read
REEDLAW Legal News Network reports: In a significant clarification on fee entitlement during insolvency proceedings, the National Company Law Tribunal (NCLT), Bengaluru Bench, ruled that an Interim Resolution Professional (IRP) is not entitled to claim any fees or expenses for the period during which the Corporate Insolvency Resolution Process (CIRP) remains stayed by the Appellate Tribunal. The Bench further held that where CIRP proceedings close pursuant to a settlement between the parties, such closure does not amount to a withdrawal under Section 12A of the Insolvency and Bankruptcy Code, 2016, thereby making the filing of Form FA unnecessary.
The National Company Law Tribunal, Bengaluru Bench, comprising Mr. Sunil Kumar Aggarawal (Judicial Member) and Mr. Radhakrishna Sreepada (Technical Member), adjudicating an Interlocutory Application filed by the Resolution Professional, held that when the Corporate Insolvency Resolution Process is stayed by the Appellate Tribunal, the Interim Resolution Professional is not entitled to claim any fees or expenses for the period of stay. It further observed that once the CIRP proceedings are closed due to settlement, such closure cannot be equated with a withdrawal under Section 12A of the Insolvency and Bankruptcy Code, 2016, and therefore, the submission of Form FA is not required.
The Interim Resolution Professional filed an interlocutory application under Regulation 30-A, 34 and 34-B of the Insolvency Resolution Process for Corporate Persons Regulations, 2016, read with Rule 11 of the NCLT Rules, 2016, seeking directions for payment of professional fees and legal expenses for services rendered during the Corporate Insolvency Resolution Process of the Corporate Debtor. The Financial Creditor had earlier initiated the CIRP by filing a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, which was admitted by the Adjudicating Authority, appointing the Applicant as the Interim Resolution Professional. Subsequently, the directors of the Corporate Debtor preferred an appeal before the Appellate Tribunal, which stayed the operation of the admission order.
During the pendency of the appeal, the Corporate Debtor and the Financial Creditor entered into a One-Time Settlement arrangement, and the dues of the Corporate Debtor were settled in full. On the basis of the settlement, the Appellate Tribunal disposed of the appeal and closed the CIRP proceedings. Thereafter, the Corporate Debtor requested the Applicant to file Form INC-28 to reflect the cessation of CIRP status in the records of the Registrar of Companies. The Applicant, however, declined to file the form, citing non-payment of CIRP costs and professional fees. The Corporate Debtor consequently approached the High Court, which directed the Applicant to file the form in accordance with the law. In the meantime, the Applicant approached the Adjudicating Authority seeking payment of ₹10,67,923/- towards fees and expenses and compliance with procedural requirements under the Code.
The Applicant submitted that the professional fees and legal costs constituted CIRP costs under Section 5(13) of the Code and were mandatorily payable prior to closure of the CIRP. It was contended that the Respondents were attempting to bypass statutory procedures and avoid payment of legitimate costs by coercing the Applicant to file Form INC-28. The Respondents, on the other hand, argued that the CIRP had been stayed by the Appellate Tribunal within a week of its commencement, that no Committee of Creditors had been constituted, and that the Applicant had no authority to demand fees or expenses beyond the stay period. It was further contended that after the settlement and closure of CIRP, no liability survived in favour of the Interim Resolution Professional.
After hearing both sides and examining the records, the Adjudicating Authority observed that once a stay had been granted by the Appellate Tribunal, the Interim Resolution Professional was legally restrained from proceeding with the CIRP. Consequently, when no activity could be undertaken during the period of stay, no fees or expenses were payable for that duration. The Tribunal further held that upon closure of the CIRP by the Appellate Tribunal pursuant to the settlement, the role of the Interim Resolution Professional came to an end, and no payment could be claimed for the post-settlement period. Considering that the Interim Resolution Professional had issued a public announcement during the initial week before the stay order, the Tribunal found ₹1,50,000/-, including GST, to be a reasonable fee for the work performed in that period.
Accordingly, the Tribunal directed the Corporate Debtor to pay ₹1,50,000/- within two weeks and held that, since the CIRP had been closed by the Appellate Tribunal and no Committee of Creditors had been constituted, the situation did not amount to a withdrawal of the CIRP application. Consequently, filing of Form FA was not necessary, and the Interim Resolution Professional stood discharged from her role. The application was thus partly allowed.
Mr. Srinandan K., Advocate, represented the Applicant.
Mr. Naveen Naika, Advocate, appeared for the Respondents.
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