2020 (8) TMI 541 - AT - Insolvency and Bankruptcy

Fees of a Liquidator - CIRP process - whether the fees of the Liquidator shall be proportionate to the liquidation estate assets? - Section 34(8) of I B Code - HELD THAT - Section 34 of the I B Code 2016 speaks of Appointment of Liquidator and fee to be paid . In reality, the ingredients of Section 34(8) of the Code enjoin that the Fees of the Insolvency Professional appointed as Liquidator shall be determined in proportion to the value of Liquidation assets . A Liquidator is entitled to such Fee and in such manner as determined by the Committee of Creditors before a Liquidation order is passed under Section 33 (1)(a) or Section 33(2) of the Code. In respect of other cases, other than those covered under Sub-Regulation (2), the Liquidator shall be entitled to a percentage of the amount realised net of other Liquidation Costs and of the sum distributed as provided in this Regulation. Further, Sub-Regulation (4) specifies that the Liquidator shall be entitled to receive half of the fee payable on realisation under Sub-Regulation (3) only after such realised sum is distributed. A Liquidator will be entitled to remuneration for the services rendered by a member of his staff. In this connection, it is pertinent for this Tribunal to make a mention that a court/tribunal has a discretion to decide the fee or remuneration of a voluntary Liquidator but the fact of the matter is that where the expense are neither justified nor ancillary/incidental to the winding up, the same may not be reimbursed. This Tribunal is of the earnest opinion that for the services to be rendered/rendered by the Liquidator in regard to the I.T. Refund Amount and the same being converted into cash, even though much effort is not required, certainly, the Liquidator is entitled to claim remuneration for this outturn of work, of course, in conformity with the I B Code coupled with the IBBI (Liquidation Process) Regulations 2016 - Appeal disposed off.

Summary

Issues:
1. Interpretation of Section 34(8) and Section 36(3)(h) of the Insolvency and Bankruptcy Code, 2016.
2. Determination of fees for the Liquidator in the liquidation process.
3. Treatment of Income Tax refund amount in the liquidation estate assets.
4. Discretion of the Adjudicating Authority in determining liquidation estate assets and Liquidator's fees.
5. Consideration of Income Tax refund as a current asset of the Corporate Debtor.
6. Compliance with IBBI (Liquidation Process) Regulations 2016.
7. Entitlement of Liquidator to claim remuneration for specific tasks.

Analysis:

1. The Appellant challenged the order passed by the Adjudicating Authority regarding the treatment of the Liquidator's fees in relation to the Income Tax refund amount. The Appellant argued that the Authority's observation was incorrect and violated the provisions of Sections 34(8) and 36(3)(h) of the Insolvency and Bankruptcy Code, 2016, along with Regulation 4(3) of the IBBI (Liquidation Process) Regulations, 2016.

2. The Appellant contended that the Adjudicating Authority erred in not considering that the Liquidator's fees should be determined based on the value of the liquidation estate assets, as specified by the Board. The Appellant emphasized that the Authority lacked the discretion to exclude the Income Tax refund amount from the liquidation estate assets for fee calculation.

3. It was argued on behalf of the Appellant that the Income Tax refund amount should be treated as a current asset of the Corporate Debtor, and the Adjudicating Authority's decision to exclude it from the liquidation estate assets was beyond its powers as per Section 34(8) of the I & B Code.

4. The Appellant raised concerns about the non-availability of substantial assets other than the Income Tax refund amount, highlighting the adverse impact on the liquidation process due to the Authority's decision. The Appellant stressed that the Liquidator's fees should not be prejudiced by the lack of funds.

5. The Tribunal, upon review, acknowledged the entitlement of the Liquidator to claim remuneration for specific tasks, including the conversion of the Income Tax refund amount into cash. The Tribunal emphasized that such remuneration should be in accordance with the provisions of the Insolvency and Bankruptcy Code and the IBBI (Liquidation Process) Regulations 2016.

6. In conclusion, the Tribunal modified the interim order passed by the Adjudicating Authority to ensure justice and compliance with the relevant legal framework. The Appeal was disposed of without costs, and the related application was closed.

By addressing the issues raised by the Appellant and providing a detailed analysis of the legal provisions and the Tribunal's decision, the judgment clarified the interpretation of the relevant laws and regulations governing the liquidation process in the context of the specific case.