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BRIJ LAL ASHOK KUMAR Versus TARA CHAND RICE MILLS PVT. LTD.

By - King Stubb & Kasiva on November 30, 2022

CASE NO.:CP (IB) No.121/Chd/Hry/2017
CORAM: HON’BLE MR. HARNAM SINGH THAKUR, MEMBER (JUDICIAL)

HON’BLE MR. SUBRATA KUMAR DASH, MEMBER (TECHNICAL)

ORDER DELIVERED ON: 14.10.2022

Counsel for the Applicant: Mr. Dhrubajit Saikia, Advocate

Counsel for the Respondent: Mr. Pulkit Goyal, Advocate

Deciding Authority – THE NATIONAL COMPANY LAW TRIBUNAL CHANDIGARH BENCH, CHANDIGARH

  • Summary: According to Section 5(13) read with Section 23(1) of the Insolvency and Bankruptcy Code, 2016, the present application is made by Mr. Sameer Rastogi, a former resolution professional for the corporate debtor, asking for a directive against the liquidator to pay the former resolution professional's fees (for the period of 21.12.2018 to 12.02.2019) totalling Rs. 5, 77,102/- as part of the insolvency resolution process.Further direction to the Liquidator to pay the aforementioned sum to the former Resolution Professional on a priority basis before distributing any other amounts in accordance with Section 53 of the I & B Code, 2016.
  • Case Timeline: IA No.953/2020 In CP (IB) No.121/Chd/Hry/2017 (admitted) Under Section 60(5) of the Insolvency & Bankruptcy Code, 2016
  • Issue Raised:[1]

Issue I -Whether the application for the payment to the Resolution Professional for the period beyond what was expressly approved by the COC is maintainable?

Issue II - Who will decide the fees, if any, due to applicant- erstwhile Resolution Professional as the COC has not been made a party to the application?

  • Petitioner’s Arguments: It is claimed that by order dated March 21, 2018, this Adjudicating Authority nominated Mr Sameer Rastogi as Interim Resolution Professional. Additionally, at the 2nd CoC meeting on May 3, 2018, the CoC decided to select IRP, Mr Sameer Rastogi, as the Resolution Professional to conduct the CIRP and determined to pay a professional fee of Rs. 4,00,000 and other expenses in accordance with Section 22(3)(a) of the I & B Code, 2016.

It is claimed that RP wrote to the former CoC on several occasions regarding the professional fee of RP (dated 21.02.2019, 06.03.2019, 18.07.2019), and that RP also sent an email reminder to the liquidator on 12.12.2019, 18.12.2019, and again on 23.12.2019 regarding the unpaid CIRP cost.

  • Respondent’s Arguments: According to the respondent-Liquidator, the applicant-erstwhile Resolution Professional failed to include the members of CoC as a party in the current application, which renders the current application unmaintainable. Further, it is claimed that the Liquidator conveyed the applicant's former Resolution Professional's request to the members of CoC for the release of overdue dues, but no response was provided.

According to the respondent, the CIRP for this case ended on September 11, 2018, and the 90-day extension also expired on December 10, 2018. Additionally, the CoC ratified no fee for the remaining period.

  • Judgement: The Bench directed the liquidator to disburse the professional fee of RP at the rate approved by CoC for the period from 21.12.2018 to 12.02.2019, i.e., up until the period ending with order of liquidation, keeping in mind the foregoing observation of the Hon'ble NCLAT in the matter of “CA Rita Gupta (Erstwhile RP in the matter of Shilpi Cable Technologies Ltd.) Vs. M/s. Shilpi Cable Technologies Ltd. Through its Liquidator Mr. Huzefa Fakhri Sitabkhan. (2022) ibclaw.in 549 NCLAT”[2]and the fact that the company in the present case is already under liquidation. The aforementioned sum must be paid to the former Resolution Professional before any other funds can be distributed in accordance with Section 53 of the I & B Code, 2016, as the aforementioned expenses fall under the category of insolvency resolution process costs, which is covered by Section 5(13).
  • Analysis: It is rightly held by the Hon’ble NCLT that in the absence of any order from this Adjudicating Authority appointing a liquidator, the applicant’s continuation as a RP is not in contravention of any provisions of IBC, as observed in the similar case of “CoC M/s. Smartec Build Systems Pvt. Ltd. vs. B. Santosh Babu & Ors. [2020] ibclaw.in 10 NCLAT”[3] that held “that the ‘Committee of Creditors’ is to pay the fees and cost incurred by Mr. B. Santosh Babu, ‘Interim Resolution Professional’, who also acted during the resolution process beyond 30 days till the date of liquidation having not allowed to continue as Liquidator.”Keeping in view of the same, respondent’s contention that no fees is payable for the extended period as the same was not ratified by the CoC is untenable.

[1]Brij Lal Ashok Kumar v Tara Chand Rice Mills Pvt. Ltd., https://www.livelaw.in/pdf_upload/brij-lal-nclt-441962.pdf

[2]CA Rita Gupta (Erstwhile RP in the matter of Shilpi Cable Technologies Ltd.) Vs. M/s. Shilpi Cable Technologies Ltd. Through its Liquidator Mr. Huzefa Fakhri Sitabkhan. (2022) ibclaw.in 549 NCLAT

[3]CoC M/s. Smartec Build Systems Pvt. Ltd. vs. B. Santosh Babu&Ors. [2020] ibclaw.in 10 NCLAT


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