Liquidators cannot recover fees from scheme proponents if the scheme is rejected, as per the regulatory framework established in the Insolvency and Bankruptcy Code.

ORDER

Per Siddharth Mishra, Member (Technical):

1. Heard the Ld. Counsels for the parties.

In C.P. (IB) No. 543/KB/2017

2. This Application has been preferred by the Liquidator of Varrsana Ispat Limited to seek the following reliefs, inter alia:

2.1.Direct the Respondent to make payment of INR 1,87,07,544/-(Rupees One Crores Eighty-seven Lakhs one Thousand five Hundred and forty-four only) towards the expenses incurred by the Liquidator during the period in which the Scheme of Compromise and Arrangement was being considered (i.e. from 06.08.2019 to 13.08.2019.

2.2.Pass such other / further order (s) as this Tribunal may deem fit and proper.

3. The applicant has submitted following for consideration:

3.1 It is submitted that the present application is filed under Section 35 (1)(n) of the Code read with Rule 11 of the NCLT Rules and Regulations 2B and 4(2)(a) of the Liquidation Process Regulations seeking directions upon the Respondent to pay a sum of ₹1,87,01,544/- towards costs allegedly incurred between 06.08.2019 and 13.08.2021, the period during which the scheme of compromise and arrangement under Section 230 was being processed before this Tribunal until its rejection.

3.2 It is claimed that liquidation commenced on 06.08.2019 and the Applicant was appointed as the Liquidator with liberty to explore a scheme under Section 230. It is submitted that a scheme proposal was received from Mr. Akshay Jhunjhunwala, a member of the suspended board, on 13.08.2019. The Liquidator contends that he undertook all required steps, including convening meetings of secured and unsecured creditors on 29.08.2019 to deliberate on the proposal.

In C.P. (IB) No. 543/KB/2017

3.3 It is further submitted that under the directions of the creditors, the Liquidator filed I.A. 1331/2019 before this Bench on 09.09.2019 placing the scheme for consideration. The Liquidator also submits that while the scheme was pending, the Hon’ble NCLAT in Jindal Steel & Power Ltd. v. Arun Kumar Jagatramka held on 24.10.2019 that a promoter ineligible under Section 29A is also ineligible to sponsor a Section 230 scheme during liquidation. It is claimed that despite this development, the Liquidator continued to act in good faith and filed I.A. 1467/KB/2019 seeking extension of time for the scheme, which was allowed by excluding the period from 05.11.2019 to 09.11.2020 from liquidation.

3.4 It is submitted that the Liquidator thereafter filed I.A.180/KB/2021 seeking a further 90-day extension for completion of the compromise or arrangement process. It is contended that all statutory obligations relating to placing the scheme before the creditors and this Tribunal were complied with. It is stated that the scheme ultimately came to be rejected on 13.08.2021 in view of the Supreme Court’s affirmation of the NCLAT judgment in Jogatramka. The present application, therefore, seeks reimbursement of the cost incurred during the period when the scheme was being processed.

3.5 It is further submitted that details of the alleged reimbursable cost have been disclosed at page 20, paragraph 17 of the application and represent amounts approved by the creditors themselves. The Applicant relies on various legal provisions to support the claim.

In C.P. (IB) No. 543/KB/2017

3.6 It is contended that Regulation 4(2)(a) permits the Liquidator to receive the same fee as was payable during CIRP for the period in which a Section 230 scheme is explored. It is also submitted that Regulation 39D of the CIRP Regulations enables the CoC to fix the fee payable to the liquidator for the period utilised for compromise or arrangement. It is claimed that Regulation 2B(3) mandates that when a scheme is not s