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2023 (2) TMI 900 - AT - Insolvency and BankruptcyLiability to pay IRP fees and expenses - Whether in the given facts of the present case, the IRP is entitled to claim fees and expenses incurred in the CIRP proceedings and, if so, whether it is incumbent upon the Operational Creditor/Respondent to bear such fees/expenses subject to their being reasonable? - HELD THAT - It is an admitted fact that the CIRP commencement date was 24.02.2020. The IRP was appointed on 09.03.2020 on which date he had sought details from the Operational Creditor and suspended management to proceed with CIRP. IRP had issued a public announcement on 11.03.2020 in accordance with CIRP Regulation 6. It is also an admitted fact that no claims were filed by the Operational Creditor or any other creditor till the time of filing of Section 19 application. The date of filing Section 19 application before the Adjudicating Authority was 16.10.2020. It is also an admitted fact that IRP did not receive any fees/expenses at the time of filing of Section 60 application on 21.03.2022. The provisions as appearing in IBC and Regulations framed thereunder read with the Code of Conduct of IRP all indicate that although quantum of fees has not been fixed, the quantum of fees payable is context specific. Thus, what fee is reasonable is context specific but what is context specific is not amenable to a precise definition. However, the fee should be a reasonable reflection of the work necessarily and properly undertaken by IRP. Further the fees should not be inconsistent with the applicable regulations and should be charged in a transparent manner. Reasonability of the fees/expenses which has been allowed by the Adjudicating Authority in the present case - HELD THAT - The IRP has claimed Rs.4,00,000/- only towards fixed fee for the period for which the CIRP had continued and this entire amount has been allowed by the Adjudicating Authority. It is an admitted fact that a substantial portion of this period was hit by the lockdown arising out of the Covid outbreak. Further, we cannot lose sight of the fact that the CIRP proceedings were stymied on account of the fact that the IRP could not lay hand on the information required to undertake various steps of CIRP like preparation of Information Memorandum, Expression of Interest etc. The IRP had also not succeeded in constituting the CoC and therefore no possibility to collate claims. It is, therefore, felt that the reasonability of the fees payable to the IRP may be determined keeping in mind that CIRP had not made much progress beyond its preliminary phase and there was no occasion to carry out any exceptional responsibility - As regards expenditure incurred on Legal expenses, Company Secretary and Out of pocket expenses which have been claimed by the IRP at the rate of Rs.50,000/- each and so allowed by the Adjudicating Authority, it needs to be rationalized by reducing it by one half. The basis of this rationalisation is that not much work complexity was involved as is borne out by the facts of the case and that it would suffice to restrict expenditure on the two aforementioned professional services and miscellaneous costs at the rate of Rs.25,000/- each. We therefore hold that payment of a consolidated amount of Rs.2,87,000/- plus GST to the IRP would suffice towards payment of fees/expenses. The quantum of fees/expenses payable to a consolidated amount modified to Rs.2,87,000/- plus GST instead of Rs.5,62,000/- - The same amount should be paid within one week from the date of uploading of this order - appeal disposed off.
Issues Involved:
1. Entitlement of the Interim Resolution Professional (IRP) to claim fees and expenses incurred in the Corporate Insolvency Resolution Process (CIRP). 2. Obligation of the Operational Creditor to bear the fees/expenses of the IRP. 3. Reasonableness and transparency of the fees/expenses claimed by the IRP. 4. Compliance with statutory provisions and regulations under the Insolvency and Bankruptcy Code (IBC). Detailed Analysis: 1. Entitlement of the IRP to Claim Fees and Expenses: The primary issue was whether the IRP was entitled to claim fees and expenses incurred during the CIRP proceedings. The Tribunal noted that the IRP had issued a public announcement and sought requisite information from the suspended management but faced non-cooperation. Despite limited progress due to lack of information and claims, the IRP's efforts were acknowledged. The Tribunal emphasized that the IRP had taken steps such as visiting the office of the Corporate Debtor and seeking approval from the Registrar of Companies (RoC). The Tribunal concluded that the IRP had discharged his duties with due diligence and was entitled to claim his fees/expenses. 2. Obligation of the Operational Creditor to Bear Fees/Expenses: The Tribunal referred to CIRP Regulation 33, which mandates that the applicant (Operational Creditor) shall bear the expenses incurred by the IRP. Given that the Operational Creditor had initiated the CIRP proceedings, it was incumbent upon them to pay for the CIRP expenses. The Tribunal rejected the Operational Creditor's claim that they were not obligated to reimburse the IRP, citing the statutory construct of the IBC. 3. Reasonableness and Transparency of Fees/Expenses: The Tribunal scrutinized the reasonableness of the fees/expenses claimed by the IRP. The IRP had claimed a total of Rs. 5,62,000/-, which included IRP fees, public announcement costs, legal expenses, company secretary fees, and out-of-pocket expenses. The Tribunal noted that the IRP's duties were limited due to the Covid-19 lockdown and lack of cooperation from the creditors. Consequently, the Tribunal rationalized the fees, reducing the IRP fees from Rs. 4,00,000/- to Rs. 2,00,000/- and halving the other professional and miscellaneous costs. The Tribunal determined that a consolidated amount of Rs. 2,87,000/- plus GST was reasonable for the IRP's services. 4. Compliance with Statutory Provisions and Regulations: The Tribunal examined the relevant provisions of the IBC, IBBI (Insolvency Professionals) Regulations, 2016, and CIRP Regulations, 2016. The Tribunal highlighted the importance of maintaining written contemporaneous records, transparency in charging fees, and ensuring that costs are reasonable. The Tribunal found that the IRP had complied with these requirements, despite the Operational Creditor's contention that the IRP had not provided detailed supporting bills. The Tribunal concluded that the IRP's fees were context-specific and reflected the work undertaken. Conclusion: The Tribunal upheld the IRP's entitlement to fees/expenses but modified the quantum to Rs. 2,87,000/- plus GST, to be paid by the Operational Creditor within one week. The appeal was disposed of with these observations, and no costs were awarded.
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