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TMI Blog2020 (9) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Professional (RP) was also continued by the Committee of Creditors (CoC) after its constitution. In the circumstance, the Applicant continued to act as RP as well of the Corporate Debtor. In the absence of any Resolution Plan, based on the decision of the CoC dated 27.07.2018 and consequent thereto, in an Application moved in MA/344/2018 this Tribunal on 20.09.2018 had ordered for liquidation of the Corporate Debtor and appointed the Applicant as the Liquidator in relation to the affairs and assets of the Corporate Debtor and its averred it is being administered as a going concern by the Liquidator as of date. 3. Since a Director of the Corporate Debtor was aggrieved by the Order of liquidation order passed by this Tribunal, an Appeal was filed before the Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 696 of 2018 and the Hon'ble NCLAT was pleased to dispose of the Appeal with an observation to the Liquidator to proceed in terms of its decision rendered in Y. Sivaram Prasad -vs- S. Dhanapal and others (Company Appeal (AT) (Insolvency) No. 224 of 2018). Subsequent to the Order in the Appeal, the Scheme for Compromise and Arrangement was received by the Liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Scheme being placed, the same is required to be treated as a sale of Corporate Debtor as a going concern under liquidation effectively to bring it within the ambit of the Regulations as it stood prior to 25.07.2019. In the circumstance, the Liquidator it is claimed is entitled to his fees calculated on the basis of both realization of Liquidation Estate and its assets on the transaction of sale as a going concern and as well as fees for the distribution of proceeds to be calculated as per the distribution time schedule filed along with the instant Application as Annexure-'A' in and by which a calculation of the Liquidator's fees is annexed along with the typed set. 6. It is also brought to the notice of this Tribunal in this Application that in view of the Scheme providing for the Liquidator's fees to be decided and approved by the IBBI, despite communications addressed to the IBBI by the Applicant, however, the Liquidator was made to understand by IBBI that the IBBI is only a Regulator and not a Judicial Authority in relation to the issue on hand and in the circumstance the issues raised by the Applicant/Liquidator is required to be placed before this Tribunal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made of the CIRP cost as ratified as well the liquidation cost including his fees to be given in priority in payment and upon approval of the Scheme to be paid within 30 days of the same as sought for in the instant Application under consideration. 11. A perusal of the said Written Submissions of the scheme proponents reveals that the Scheme Proponent has dealt in detail not only in relation to the Liquidator's fees and liquidation cost payable to the Applicant but as well as other issues which has been raised by the Liquidator in his report dated 24.01.2020 filed pursuant to the directions of this Tribunal dated 10.01.2020 and which observations has invited a scathing rebuttal on the part of the Scheme Proponent. Be that as it may, this Tribunal is not concerned with all those objections as projected by the Scheme Proponents in view of the submissions made by the Ld. Counsel for the Liquidator as well as the Liquidator that the observations made otherwise than in relation to the liquidation cost and fees and the duration of its payment as given in the Scheme is not being pressed and required to be eschewed in view of the reasons given in detail of the Order dated 10.01.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solvency Resolution Process for Corporate Persons) Regulations, 2016 as well as IBBI (Liquidation Process) Regulations, 2016 for any fees to be paid to the Liquidator in case of a Scheme being placed at the time when the order of liquidation was passed. Under the circumstance the Scheme as placed before this Tribunal for its sanction was carved out due to judicial precedent established by the Hon'ble NCLAT. In this connection, it is also highlighted by the Ld. Counsel for the Scheme Proponents as well as the Counsel for the Liquidator that only on and from 25.07.2019 by virtue of amendment made to the Regulations namely, IBBI {Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and IBBI (Liquidation Process) Regulations, 2016; IBBI has sought to amend these Regulations in relation to the fees payable to the Liquidator in case a Scheme being propounded and placed before this Tribunal, subsequent to the order of liquidation. 16. In the circumstance, it is also brought to the notice of this Tribunal that the Regulations as it stood un-amended prior to amendment of the Regulations made w.e.f. 25.07.2019 should apply as the order of liquidation was passed by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amendment to the Regulations of both the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and IBBI (Liquidation Process) Regulations, 2016 by the IBBI made effective from 25.07.2019. However, for a better appreciation of the position in relation to Liquidation cost and fees, subsequent to amendment effective from 25.07.2019, in the case of a Scheme being placed will also be to the limited extent, for sake of clarity, will be relevant. Hence the relevant provisions pre and post amendment made effective from 25.07.2019 for the said purpose is extracted as below: firstly prior to the amendment of the Regulations made effective from 25.07.2019 and subsequently that of the amended Regulations upon amendment to the Regulations made effective on and from 25.07.2019 by IBBI. PRE AMENDMENT POSITION OF THE IBBI (IRCP) REGULATIONS, 2016 AND IBBI (LIQUIDATION PROCESS) REGULATIONS, 2016 AS WELL AS THE RELEVANT PROVISIONS OF IBC, 2016: - 19. The judicial precedents as laid down in S.C. Sekaran's case as well as Y. Sivaram Prasad's case it must be noted is only in reiteration of the amendments to the Companies Act, 2013 made by virtue of the Eleventh Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finance for a period of twelve months or for the period from the liquidation commencement date till repayment of interim finance, whichever is lower; 4. Liquidator's fee. (1) The fee payable to the liquidator shall form part of the liquidation cost. (2) The liquidator shall be entitled to such fee and in such manner as has been decided by the committee of creditors before a liquidation order is passed under sections 33(1)(a) or 33(2). (3) In all cases other than those covered under sub-regulation (2), the liquidator shall be entitled to a fee as a percentage of the amount realized net of other liquidation costs, and of the amount distributed, as under: (4) The liquidator shall be entitled to receive half of the fee payable on realization under sub-regulation (3) only after such realized amount is distributed. 21. A Combined reading of Regulation 2(ea) read with Regulation 4 of IBBI (Liquidation Process) Regulations, 2016 shows that the fees of the Liquidator can be decided by the CoC before a Liquidation order is passed by this Tribunal in terms of Section 33 of IBC, 2016 and in its absence sub-regulation (3) of Regulation 4 of the Liquidation Process Regulations sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of the Eleventh schedule to IBC, 2016 as already discussed in paragraph supra. In the circumstances, even though there has been no omission on the part of the legislature while enacting the statute, namely IBC, 2016, however on the part of the Regulator there obviously seems to be a case of 'casus omissus' which it is submitted by the Scheme Proponents is to be filled in by this Tribunal as there cannot be an outstanding issue in relation to the fees of the Liquidator and 'the Liquidator cannot be left high and dry in relation to fees chargeable by him under the Regulation 4 of IBBI (Liquidation Process) Regulations as it stood prior to amendment which never contemplated within its ambit of a Scheme being placed after Liquidation. Hence in order to resolve this issue it is submitted that the amended Regulations for the limited purpose of fixing the Liquidator's fees can be considered as a way of filling the gaps left by the Regulator pre-amendment and in this connection draws the attention to the amended Regulation 4 of IBBI (Liquidation Process) Regulations w.e.f. 25.07.2019 and in particular to sub-regulation (2) of Regulation 4 of the said Regulations. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate as the resolution professional was entitled to during the corporate insolvency resolution process, for the period of compromise or arrangement under section 230 of the Companies Act, 2013 (18 of 2013); and (b) as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation, as under: (3) Where the fee is payable under clause (b) of sub-regulation (2), the liquidator shall be entitled to receive half of the fee payable on realisation only after such realised amount is distributed. Clarification: Regulation 4 of these regulations, as it stood before the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 shall continue to be applicable in relation to the liquidation processes already commenced before the coming into force of the said amendment Regulations. 7. Appointment of professionals. (1) A liquidator may appoint professionals to assist him in the discharge of his duties, obligations and functions for a reasonable remuneration and such remuneration shall form part of the liquidation cost. (2) The liquidator shall not appoint a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with the resolution professional, fix the fee payable to the liquidator, if an order for liquidation is passed under section 33, for - (a) the period, if any, used for compromise or arrangement under section 230 of the Companies Act, 2013; (b) the period, if any, used for sale under clauses (e) and (f) of regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016; and (c) the balance period of liquidation. 25. A collective reading of the amended Regulations as extracted of both IRCP Regulations and Liquidation Process Regulations, 2016 brings to the fore the contention of the Scheme Proponents that in order to fill the gaps, the amended Regulations can be, in effect, for the limited purpose be taken into consideration to ascertain the fees payable to a Liquidator more as a guide about the thought process of the Regulator in view of the law relating to insolvency as contemplated under IBC, 2016 is in the process of evolving and adopting itself to myriad situations and hence as contemplated under the amended Regulations as extracted above made effective from 25.07.2019 in the case of the Scheme on behalf of its Proponent, it is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as external reconstruction is of a very wide amplitude encompassing within itself, the schemes contemplated by way of compromise or arrangement under section 230 of the Companies Act, 2013. However it fails to offer any precise solution as to whether the restructuring exercise contemplated by the scheme proponents can be brought under the definition of any of the modes of 'Sale' as contemplated under Regulation 32 of Liquidation Process Regulations as framed by the IBBI and in its absence, as to whether it is permissible for the liquidator to claim a percentage of fees both on realization of proceeds and its distribution. Again referring to the book authored by Mr. K.R. Sampath, Advocate Solicitor, Supreme Court of England & Wales, as referred in the earlier portion of this paragraphs to the 5th Edition brought by the publishers in 2009 has extracted from the stand point of Corporate Law, a decision of Buckley J, rendered in Re. South African Supply & Cold Storage Co.(1), (1904) 2 Ch. 268, 286 (Ch. D) at page 613 of the above edition, which is to the following effect:- "What does 'reconstruction' mean? To my mind it means this. An undertaking of some definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een fully conscious inter alia of the said situation, however in this connection has chose to issue a clarification at the foot of the Regulation 4 itself as it stood amended on and from 25.07.2019 to the following effect; Clarification: Regulation 4 of these regulations, as it stood before the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 shall continue to be applicable in relation to the liquidation processes already commenced before the coming into force of the said amendment Regulations. 29. Thus, this Tribunal is required to only apply in relation to ascertaining the amount of fees payable to the Liquidator, the unamended Regulations i.e. the Regulation of Liquidation Process Regulations as it stood prior to 25.07.2019 and cannot apply the amended Regulations even as a guide in this regard as submitted by the Ld. Counsel for the Scheme proponents. The question of applicability of Regulation 39D of the IRCP Regulations, 2016 as amended from 25.07.2019 cannot also be applied under the circumstances. Thus being conscious that this Tribunal being a creature of the statute and is required to apply the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which tabulation has also been extracted in para 22 supra is sustainable and in the absence of committee of creditors fixing the fees of the Liquidator or the Liquidation costs, is required to be hence allowed. 32. However, in relation to the Liquidation costs, other than the fees which is payable to the Liquidator is required to be defrayed by the Scheme proponents based on actual expenses incurred by the Liquidator and upon the Liquidator furnishing sufficient proof along with vouchers for having incurred such expenditure. Eventhough Regulation 4 of the Liquidation Process Regulations, 2016 is silent in this regard pre-amendment, post amendment to Regulation 4 of the Liquidation Process Regulations, 2016, w.e.f. 25.07.2019 contemplates different heads under which Liquidation costs can be classified which this Tribunal is of the view can apply on the principle of "casus omissus" and the Liquidator will be required to furnish by way of statement to the Scheme proponents the heads under which the Liquidation costs is sought to be reimbursed along with vouchers and proof for incurring such payment by the Liquidator. In case of any disputes in relation to the Liquidation costs, sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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