The New Delhi Bench of the National Company Law Tribunal (NCLT) ruled that the liquidator is entitled to fee under Section 34 of the Insolvency and Bankruptcy Code, 2016 (IBC) and Regulation 4 of the Liquidation Regulations, 2016.
The Counsel who appeared for the Appellant submitted 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 was 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 compromise or arrangement is not sanctioned by the Tribunal, the Applicant (Proponent of the Scheme) of such compromise or arrangement is burdened with the cost.
It was submitted that if liquidation fee and cost is not charged from Scheme Proponent, non-serious parties or parties with vested interest and malafide motives may come up and propose compromise and arrangement and will be able to successfully halt the liquidation process without any pecuniary consequences on them.
The counsel further noted that the Appellant was not required to work free of cost during the period of consideration of the scheme of compromise and arrangement. It was the Scheme Proponent, who has to bear the liquidation fee. The terminology of “liquidation cost”, is not applicable to cases under Section 230 of the Companies Act, 2013. The Adjudicating Authority was unjustified in depriving the Appellant of its legitimate fee and the order is against the provisions of the Code and Regulations.
The counsel for the respondent submitted that the Liquidator pressurized the Respondent into making payment, which is clear from the email sent by the Liquidator on 23.12.2022. Even after the scheme was rejected on 17.02.2023, the Liquidator accepted the amount from the Respondent and that as per Regulation 2B(3) of the Liquidation Regulations, 2016, cost in relation to compromise and arrangement is to be borne by the parties, who proposes compromise and arrangement.
A Two-Member Bench comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Member (Technical) observed that “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.”
“In view of the foregoing discussions and our conclusion, we are of the view that the Adjudicating Authority has rightly directed the Liquidator to refund of the amount. As observed above, the Liquidator at best is entitled to expenses as claimed by him in the liquidation process and if the amount of all expenses claimed by the Liquidator are deducted, still the Liquidator is liable to refund the amount of Rs.22,77,108/-, as per his own calculation. We, thus, are of the view that direction to refund the amount of Rs.23,88,280/- be modified for refund of the amount of Rs.22,77,108/-“ the Bench concluded.
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