Fees Paid to Liquidator to be Paid under Regulation 4(2)(b) of Liquidation Process Regulations on Realization and Distribution of Proceeds from Auction of Assets: NCLAT [Read Order]

The New Delhi Bench of the National Company Law Appellate Tribunal ( NCLAT ) observed that the fees paid to Liquidator to be paid under Regulation 4(2)(b) of the Insolvency and Bankruptcy Board of India ( Liquidation Process ) Regulations, 2016 on realization and distribution of proceeds from auction of assets.

The counsel for the liquidator submitted that the liquidator was unable to sell the assets of corporate debtor due to attachment of the assets by the Enforcement Directorate ( ED ). The Regulation 4(2)(b) of Insolvency and Bankruptcy Board of India ( Liquidation Process ) Regulations, 2016, prescribed fees for the liquidator on the basis of percentage of realisation and distribution and that since no sale could take place due to attachment by the ED, the liquidator is not getting fees to perform his services.

It was submitted that in this case the liquidation of the corporate debtor commenced on 15.10.2019 and the assets of the corporate debtor were attached by the Enforcement Directorate on 08.01.2020 and that liquidator has not been paid any fees since 29.01.2020. It was submitted that liquidator had diligently persued with the relevant authorities regarding lifting of attachment and has also been carrying out various functions on behalf of the corporate debtor during the liquidation process.

The counsel on behalf of the respondent no.1 averred that the learned Adjudicating Authority has rightly dismissed the applications filed by the debtor after considering the views of the Stakeholders’ Consultation Committee ( SCC ) on the issue of payment of remuneration to the liquidator that it is payable only as per Regulation 4(2)(b) of ‘Liquidation Process Regulation’. It was submitted that the liquidator has been paid from the proceeds of the sale conducted so far in terms of Regulation 4(2)(b) of the ‘Liquidation Process Regulation’ and that liquidator is not entitled to any additional remuneration in addition to the percentage which SCC is paying as per the said Regulation.

A Two-Member Bench comprising Justice Rakesh Kumar Jain, Member ( Judicial ) and Ajai Das Mehrotra, Member (Technical) observed that “From perusal of the regulations as they existed on the date of liquidation order, it appears that the fees of the liquidator was to be either the fees decided by the CoC under Regulation 39D of IBBI ( CIRP ) Regulations, 2016 or a percentage of fee on the amount that is realised/ distributed during the liquidation process. The Regulations, as it existed at the time on the date of the liquidation order, do not envisage payment of any fees or remuneration to the liquidator on a monthly basis, if such fee is not fixed by the CoC under Regulation 39D of IBBI ( CIRP ) Regulations, 2016.”

“Considering the regulations as they existed at the time when liquidation order was issued in this case, and that no fees was fixed by the CoC, we are of the opinion that fees to be paid to the Liquidator in this case shall be as per the percentage prescribed in Regulation 4(2)(b) of IBBI ( Liquidation Process ) Regulations, 2016 on realization and distribution of proceeds from auction of assets” the Tribunal concluded.

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