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Success fees do not fall under the provisions of the Insolvency and Bankruptcy Code, 2016

The National Company Law Appellate Tribunal (NCLAT) has raised questions over the legitimateness of achievement expenses paid to goal experts upon the fruition of an effective corporate goal under the Insolvency and Bankruptcy Code (IBC).

Although the fees of the valuer had been ratified by the CoC, in the facts of the matter where CIRP had been set aside, the Supreme Court held in their verdicts that the Adjudicating Authority has the power to determine the amount payable to an expert valuer as an intrinsic part of the CIRP. The Learned Amicus Curiae has further rightly pointed out that the Appellant claiming that he had done excessively well to deserve Rs. 3 Crores of success fees, the Adjudicating Authority had made comments as to what was the scenario when it was supervising the CIRP. The Appellate authority considered the observations of the AA in impugned para 23 of the impugned order. The AA was at the ground level monitoring the progress of CIRP and its observations cannot be simply ignored.

The Appellate Authority observed for the above reasons, "the ‘success fees’ which was more in the nature of the contingency and speculative is not part of the provisions of the IBC and the Regulations and the same was not chargeable. Apart from this, even if it was to be said that it was chargeable in the present matter, the manner in which, it was last minute pushed at the time of approval of the Resolution Plan and the quantum was both improper and incorrect."

The argument that the AA should have sent the matter back to the CoC if it was not approving the success fee deserves to be discarded as the AA while not accepting the success fee merely asked proportionate distribution which would even otherwise have happened if “success fee” was set aside as the money would become available improving the percentage of other creditors’ dues. For such reasons, the Appellate Tribunal did not find that there was any substance in the Appeal.

View Judgment

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