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2021 (9) TMI 746 - Tri - Insolvency and BankruptcyLiquidation of Corporate Debtor - percentage of distribution of CIRP liquidation cost, pursuant to sec 53 of IBC, 2016 read with regulation 42 of IBBI (Liquidation Process) Regulations, 2016 between the secured creditors - HELD THAT - It is evident from the bare perusal of the section 53 of the IBC, 2016 that the proceeds from the sale of the Liquidation assets shall be distributed in such an order that the Insolvency resolution process cost and Liquidation cost to be paid in full in the first and the foremost priority, along with that the Regulation 42 of IBBI (Liquidation Process) Regulations, 2016 clearly specifies that the Liquidation cost shall be deducted before the distribution is made. Whereas, in the present case in hand the applicant submits that the Respondent No. 1 i.e., SIDBI has not paid the contribution towards the CIRP and Liquidation cost except ₹ 60,000/- - in the present case in hand the Applicant/Liquidator's prayer as to whether to charge in the percentage of claim admitted or in the percentage of realization stands answered that the applicant/Liquidator shall calculate the fees proportionately on the basis of realization. The Respondent No. 2 and Respondent No. 3 as stated by applicant in the application do not have any objection to the same. Whereas, the reply filed by the Respondent No. 1 contains no valid contention in respect to calculation of fees Proportionately from the proceeds. Whether as per regulation 2A of IBBI (Liquidation Process) Regulations, 2016 i.e., amended on 25.07.2019, the financial institution (unsecured creditor) who was the CoC member during the period of CIRP, is liable to pay the CIRP Liquidation Cost u/s. 53 of IBC, 2016? - HELD THAT - It is clearly evident that the above said regulation is not applicable on the Liquidation proceedings of the present matter in hand. Further, as submitted by the applicant/Liquidator the realization from assets is enough to cover the Liquidation cost. Hence, the Respondent No. 1 i.e., SIDBI contention that financial creditors to contribute excess of the financial costs over the Liquid assets of the Corporate Debtor as stated in Regulation 2A of IBBI (Liquidation Process) Regulations, 2016 does not stand any merit. Whether the period of dispute between liquidator secured creditor should be excluded, to calculate of percentage of fees of liquidator? - HELD THAT - Since, the Applicant/liquidator successfully listed out the circumstances due to which the delay in completion of Liquidation process has taken place along with the Directions which the Applicant/Liquidator sought from the Adjudicating Authority in respect to the disputes arisen with the Respondent No. 1 i.e., SIDBI hence, the period of dispute between the secured Creditor and the Liquidator is excluded as the applicant successfully shown his bona fide for the delay in completion of Liquidation Process. Whether the secured creditor, who has realized from the property u/s. 52 of IBC, 2016 is liable to pay the liquidation cost? - HELD THAT - In the present matter in hand the applicant/Liquidator submitted that the Respondent No. 3 i.e., Corporation Bank raised the objection to bear the Liquidation cost incurred after the date i.e., 16.01.2020 of realization of their property u/s. 52 of IBC, 2016 since, the Respondent No. 3 has already realized from the property thus, it may not be proper to direct the Respondent No. 2 and Respondent No. 3 to bear their part of the Liquidation cost for the delay caused due to dispute between the Applicant/Liquidator and Respondent No. 1. Hence, in this peculiar situation this tribunal directs the Liquidator to meet the Liquidation cost as a priority from the funds realised in liquidation. Application disposed off.
Issues Involved:
1. Percentage of distribution of CIRP & liquidation cost. 2. Applicability of Regulation 2A of IBBI (Liquidation Process) Regulations, 2016. 3. Exclusion of the period of dispute between liquidator & secured creditor for calculating the liquidator's fees. 4. Liability of secured creditors to pay liquidation costs after realization of their property. Issue-wise Detailed Analysis: I. Percentage of Distribution of CIRP & Liquidation Cost: The application sought directions on whether the distribution of CIRP & liquidation cost should be based on the percentage of claim admitted or the percentage of realization. The applicant contended that there is no specific provision in IBC, 2016 or the regulations for this calculation. Respondent No. 1 (SIDBI) argued for distribution based on voting rights during CIRP, while Respondents No. 2 & 3 agreed with the applicant's calculation based on realization. The Tribunal emphasized that as per Section 53 of IBC, 2016 and Regulation 42 of IBBI (Liquidation Process) Regulations, 2016, the insolvency resolution process costs and liquidation costs must be deducted before distribution. The fees payable to the liquidator should be deducted proportionately from the proceeds payable to each class of recipients. Hence, the Tribunal concluded that the fees should be calculated on the basis of realization, and Respondents No. 2 & 3 had no objections to this method. II. Applicability of Regulation 2A of IBBI (Liquidation Process) Regulations, 2016: The second issue was whether Regulation 2A, amended on 25.07.2019, applied to the liquidation proceedings of the company. The applicant argued that the regulation is not applicable to liquidation processes commenced before the amendment date. The Tribunal agreed, noting that the liquidation process in this case started on 25.09.2018. Therefore, Regulation 2A, which requires financial creditors to contribute to excess liquidation costs, did not apply. The realization from assets was sufficient to cover the liquidation costs, making SIDBI's contention invalid. III. Exclusion of Period of Dispute for Calculating Liquidator's Fees: The third issue was whether the period of dispute between the liquidator and the secured creditor should be excluded in calculating the liquidator's fees. The applicant cited delays due to unresolved issues with SIDBI, which were eventually decided by the Tribunal. The Tribunal acknowledged the applicant's bona fide efforts and the circumstances leading to the delay. Thus, it concluded that the period of dispute should be excluded when calculating the liquidator's fees, aligning with the intent of regulation 21A of IBBI (Liquidation Process) Regulations, 2016. IV. Liability of Secured Creditors to Pay Liquidation Costs After Realization: The fourth issue concerned whether secured creditors, who realized their property under Section 52 of IBC, 2016, were liable to pay liquidation costs incurred after realization. Respondent No. 3 (Corporation Bank) objected to bearing these costs. The Tribunal noted that the liquidation cost should be met from the funds realized in liquidation, given the peculiar situation where the delay was due to disputes between the applicant and SIDBI. Therefore, it directed the liquidator to prioritize meeting the liquidation costs from the realized funds. Conclusion: The Tribunal provided clear directions on each issue, emphasizing the need for proportional calculation of fees based on realization, non-applicability of Regulation 2A to pre-amendment liquidation processes, exclusion of dispute periods for fee calculation, and prioritizing liquidation costs from realized funds. The applications CA/135/2019 and IA/3570 of 2020 were disposed of accordingly.
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