2018 (5) TMI 856 - AT - Insolvency and Bankruptcy

Committee of Creditors liability to bear the expenses incurred by the Insolvency Resolution Professional - Held that - As per Regulation 33, the applicant means the person who files the application under Section 7 or 9 of the Insolvency and Bankruptcy Code, 2016 who generally proposes the name of the interim resolution professional . Such applicant negotiates the fee to be charged and paid to the interim resolution professional. As per the provision aforesaid, the Adjudicating Authority is required to fix the expenses where the applicant has not fixed expenses under sub-regulation (1) of Regulation 33. In such case, the applicant, who has filed the application under Section 7 or 9 of the I & B Code, is required to bear the expenses which is to be reimbursed by the committee of creditors to the extent the Committee of Creditors ratifies the same. In the present case, the application was filed by the respondent(s) under Section 7 of the I & B Code, 2016 and under Section 9 of the I & B Code, 2016. The name of resolution professional were suggested by the applicant of such application. Therefore, as per sub-regulation (1) of Regulation 33, the applicant is liable to incur the expenses of resolution professional. Thereafter, the applicant will get the amount reimbursed by the Committee of Creditors to the extent the amount as is ratified by the Committee. The expenses will include all expenses as explained above in clause (4) of Regulation 33.

Summary

Issues:
1. Liability of Committee of Creditors to bear expenses of Insolvency Resolution Professional.

Analysis:
The judgment involves appeals by the State Bank of India, a Financial Creditor and member of the Committee of Creditors, against orders passed by the Adjudicating Authority. The appeals concern the direction for the Committee of Creditors to bear expenses related to the Insolvency Resolution Professional (IRP). The key issue is whether the Committee of Creditors is obligated to cover the expenses incurred by the IRP.

Regulation 33 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 addresses the "cost of the interim resolution professional." It stipulates that the applicant, who files the insolvency application, is responsible for fixing the expenses for the IRP. If the applicant does not determine the expenses, the Adjudicating Authority will do so. The expenses borne by the applicant are to be reimbursed by the Committee of Creditors upon ratification. These ratified expenses are considered insolvency resolution process costs.

In this case, the respondents filed applications under Section 7 or 9 of the Insolvency and Bankruptcy Code, 2016, suggesting the names of the IRPs. As per Regulation 33, the applicant is initially liable for the IRP expenses, which are later reimbursed by the Committee of Creditors upon ratification. The orders passed by the Adjudicating Authority directing the Committee of Creditors to bear the IRP expenses were upheld based on the regulatory framework.

Therefore, the judgment clarifies that the Committee of Creditors is indeed liable to bear the expenses incurred by the Insolvency Resolution Professional, as per the provisions of Regulation 33. The impugned orders were modified accordingly, and the appeals were disposed of with the specified observations and directions.