9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (12) TMI 444 - AT - Insolvency and BankruptcyRefund of amount which was received from Respondent towards fee of Liquidator and cost - Appellant challenging the impugned order submits 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. HELD THAT - Sub-clause (3) of Regulation 2B specifically provides that any cost incurred by the Liquidator in relation to compromise or arrangement shall be borne by the Corporate Debtor, where such compromise or arrangement is sanctioned by the Tribunal under sub-section (6) of Section 230 and whereas such cost shall be borne by the parties who proposed compromise or arrangement, where such compromise or arrangement is not sanctioned by the Tribunal under sub-section (6) of Section 230. Whether the Scheme Proponent, who has submitted scheme for compromise and arrangement is liable to pay any liquidation fee, since in the present case, Liquidator is claiming a liquidation fee of Rs.23,01,000/- from the Scheme Proponent? - HELD THAT - The provision of Section 34, sub-sections (8) and (9) is perused, which deals with fee of Liquidator for conduct of liquidation proceedings. The payment of fee, thus, has to be as per the statutory provisions under Section 34 sub-sections (8) and (9). Regulation 2B, which deals with compromise or arrangement specifically provide for payment of cost incurred by the Liquidator in relation to compromise and arrangement - The sub-regulation (3) of Regulation 2B, makes it clear that Liquidator is entitled to receive the cost incurred by the Liquidator in reference to comprise and arrangement from the Corporate Debtor and from the Proponent of the Scheme. In case the compromise is sanctioned, the cost shall be borne by the Corporate Debtor and in case compromise is not sanctioned the cost shall be borne by the parties, who proposed compromise or arrangement. The statutory provision is, thus, clear that Liquidator can only claim cost incurred from the parties who proposed the compromise or arrangement. A Scheme Proponent, who according to the Appellant is non-serious can be saddled with the cost, which may be a deterrent factor for any non-serious Scheme Proponent to submit a Scheme - the submission of the Appellant that Scheme Proponent should be saddled with liquidation fee is clearly contrary to the statutory scheme. Further, the definition of liquidation cost as contained in Regulation 2(ea) clearly provides that cost incurred by the Liquidator in relation to compromise or arrangement under Section 230 of the Companies Act, if any, shall not form part of liquidation cost. The said provision when read with Regulation 2B, clearly makes it clear that cost incurred with regard to compromise or arrangement has to be borne by the Corporate Debtor or Scheme Proponent. However, the said provision does not indicate that the Liquidator is not entitled to claim his fee during the period compromise or arrangement is under consideration. Since the Liquidator is entitled for his fee as per the provision of Section 34, subsections (8) and (9) and Regulation 4, it cannot be said that Liquidator is left high and dry with regard to his fee during the period compromise or arrangement is under consideration. However, whether Liquidator is entitled to fee beyond the period of 90 days for completion of compromise or arrangement is a different question, which need no answer in the present Appeal. The Adjudicating Authority committed no error in directing the Liquidator to refund fee, which was wrongly realized from the Respondent. The Appellant himself has brought on record various emails and reminders sent by the Liquidator to Respondent where Liquidator has asked Respondent No.1 to make various payments and the payments were made. The Liquidator was not entitled to claim any liquidation fee from Respondent for the period during which compromise and arrangement scheme was under consideration. As noted above in paragraph 14 of the reply, the Liquidator has claimed a fee of Rs.23,01,000/-, which is clearly unsustainable. Liquidator in paragraph 14 has given the details of all expenses and fee payable totaling to Rs.24,12,172. At the highest, the Liquidator was entitled to expenses. Thus, even if we allow all expenses claimed in paragraph 14 of the reply of the Liquidator, he was not entitled to a fee of Rs.23,01,000/- and after deducting the amount of Rs.23,01,000/- in total amount, the Liquidator at best is entitled for amount of Rs.1,11,172/- towards all expenses claimed by the Liquidator. 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 - the direction to refund the amount of Rs.23,88,280/- be modified for refund of the amount of Rs.22,77,108/-. From the facts which have been noticed and the manner in which the Liquidator has conducted the liquidation process, raises question on understanding of the liquidation process, liquidation regulations and the manner in which the Liquidator has demanded liquidation fee from the Scheme Proponent - appeal dismissed.
Issues Involved:
1. Whether the Liquidator is entitled to receive a fee from the Scheme Proponent for the period of compromise and arrangement. 2. Whether the Liquidator's claim to retain the amount received from the Scheme Proponent is justified. 3. Whether the Adjudicating Authority committed any error in directing the refund of the amount to the Scheme Proponent. Summary: Issue 1: Entitlement of Liquidator's Fee from Scheme Proponent The Liquidator claimed a fee of Rs.23,01,000/- from the Scheme Proponent for the period of compromise and arrangement. The Liquidator justified this fee based on Regulation 4(2)(a) read with Proviso to Regulation 2B(3) of the Liquidation Regulations, 2016, arguing that the fee is necessary to prevent non-serious proposals from halting the liquidation process without consequences. However, the Adjudicating Authority held that the Liquidator is not entitled to receive any fee from the Scheme Proponent. The Tribunal emphasized that Regulation 2B only refers to the cost incurred by the Liquidator in relation to compromise or arrangement and does not include any fee. The Liquidator's fee must be paid from the proceeds of the liquidation estate as per Section 34, sub-sections (8) and (9) of the Insolvency and Bankruptcy Code, 2016. Issue 2: Justification of Retaining the Amount The Liquidator received a total amount of Rs.23,88,280/- from the Scheme Proponent towards the liquidation fee and costs. The Adjudicating Authority directed the Liquidator to refund this amount, stating that the liquidation cost, including the fee, was wrongly claimed from the Scheme Proponent. The Tribunal noted that the Liquidator can only claim the cost incurred in relation to the compromise or arrangement from the parties proposing it, and not the fee. The Tribunal found the Liquidator's claim to retain the amount unjustified and unsupported by any statutory scheme. Issue 3: Error in Directing Refund The Tribunal supported the Adjudicating Authority's decision to direct the refund of the amount. It was determined that the Liquidator was not entitled to the claimed fee of Rs.23,01,000/- and was only entitled to expenses amounting to Rs.1,11,172/-. Consequently, the Tribunal modified the refund amount to Rs.22,77,108/-, as per the Liquidator's own calculation of expenses. Conclusion: The Tribunal concluded that the Liquidator was not entitled to claim any liquidation fee from the Scheme Proponent and upheld the Adjudicating Authority's order for refund, with a modification in the amount to Rs.22,77,108/-. The Tribunal also directed that a copy of the order be forwarded to the Insolvency and Bankruptcy Board of India for information and appropriate action. The appeal was dismissed.
|
