2019 (1) TMI 1184 - AT - Insolvency and Bankruptcy

Excessive payment to Interim Resolution Professional - payment of ₹ 5 lakh to Interim Resolution Professional for his working for 30 days is excessive and arbitrary? - Held that - The consolidated amount of ₹ 6 lakh has been charged jointly for the firm - Ensemble Resolution Professionals Pvt. Ltd. and the Interim Resolution Professional and not towards the fee of Interim Resolution Professional . Admittedly, the Applicant (Financial Creditor) had not fixed the expenses to be incurred by the Interim Resolution Professional. As per Sub-regulation (2) of Regulation 33, the Adjudicating Authority was required to fix the expenses which includes the fee to be paid to the Interim Resolution Professional and other expenses. The application under Section 7 was admitted on 13th June, 2018. The copy of which was received by the Interim Resolution Professional on 20th June, 2018. Finally the proceeding was terminated by judgment of this Appellate Tribunal dated 17th July, 2018, thereby we find that the Interim Resolution Professional has worked for 27 days. We find that the Interim Resolution Professional has performed duty only for 27 days and not incurred any expenses, except for travelling allowance which he is entitled to, we hold that ₹ 5 Lakh (Rupees Five Lakhs Only) allowed by the Adjudicating Authority is excessive. Adjudicating Authority has failed to notice that claim of ₹ 6 Lakh (Rupees Six Lakhs Only) was made by the firm namely Ensemble Resolution Professionals Pvt. Ltd. , payable to the Interim Resolution Professional. As the aforesaid firm is not eligible or entitled to receive any fees or any cut or commission from the fees of the Interim Resolution Professional , demand of Rupees Six Lakhs cannot be accepted. Taking into consideration the facts and circumstances of the case, we are of the view that a sum of ₹ 1.5 Lakhs (Rupees One Lakh Fifty Thousand) should be paid in favour of the Interim Resolution Professional for his functioning for period of 27 days (which is approximately 30 days). In addition ₹ 25,000/-, is allowed towards travel expenditure, if any, incurred by the Interim Resolution Professional. Thus, Interim Resolution Professional is allowed a sum of ₹ 1.75 Lakh (Rupees One Lakh Seventy Five Thousand Only) to be paid by the Appellant (Corporate Debtor), which should be paid within two weeks. The impugned order dated 10th August, 2018 stands modified to the extent above.

Summary

Issues:
1. Excessive and arbitrary lump sum fee of ?5 lakh directed by the Adjudicating Authority for the Interim Resolution Professional.
2. Interpretation of relevant provisions of the Insolvency and Bankruptcy Code, 2016.
3. Determination of the appropriate fee payable to the Interim Resolution Professional.

Analysis:

Issue 1:
The appeal was filed against the order directing the Corporate Debtor to pay a lump sum fee of ?5 lakh to the Interim Resolution Professional for 27 days of work. The Corporate Debtor argued that the fee was excessive and arbitrary. The Interim Resolution Professional claimed a fee of ?6.50 lakhs for 30 days, as agreed upon by the parties. The Tribunal analyzed the communication between the parties and found that the fee charged jointly by a firm and the Interim Resolution Professional was not towards the fee of the professional. Considering the lack of expenses incurred by the professional and the circumstances, the Tribunal held that the ?5 lakh fee was excessive and reduced it to ?1.75 lakh, along with an additional ?25,000 for travel expenses.

Issue 2:
The Tribunal referred to Section 7(3)(b) of the Insolvency and Bankruptcy Code, which empowers a Financial Creditor to name the Resolution Professional proposed as the Interim Resolution Professional. The Tribunal highlighted the requirement for written consent from the proposed professional and the need for a certificate confirming their eligibility. The Tribunal emphasized the importance of following the regulations and forms prescribed under the Code for the appointment and functioning of the Interim Resolution Professional.

Issue 3:
The Tribunal examined the provisions of the Insolvency and Bankruptcy Code regarding the fixing of expenses for the Interim Resolution Professional. It noted that if the Applicant does not fix the expenses, the Adjudicating Authority is required to determine the fees. The Tribunal considered the lack of expenses incurred by the professional and the communication between the parties to arrive at a reasonable fee of ?1.75 lakh for the professional's 27 days of work. The Tribunal modified the impugned order to reflect this revised fee amount.

In conclusion, the Tribunal addressed the issues of excessive fee determination, interpretation of relevant provisions, and the appropriate fee payable to the Interim Resolution Professional, providing detailed reasoning and modifying the original order accordingly.