Liquidator’s Fee, how calculated
NCLAT Rules on Liquidator’s Fee: Calculation Based on Liquidation Commencement Date. Liquidator's appeal dismissed; fee computation upheld as per IBBI Regulation 4(2)(b).
In a significant judgment, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has dismissed an appeal filed by Rakesh Kumar Tulsyan, the liquidator of Vipul S. Plastocrafts Pvt. Ltd., against Omkara Asset Reconstruction Pvt. Ltd. The appeal challenged the adjudicating authority's decision regarding the computation of the liquidator's fee based on the liquidation commencement date, as per Regulation 4(2)(b) of the Insolvency and Bankruptcy Board of India (IBBI) Liquidation Process Regulations, 2016.
The case, heard by Justice Ashok Bhushan, Chairperson, and Barun Mitra, Member (Technical), revolved around the interpretation of the fee slabs prescribed under Regulation 4(2)(b). The liquidator contended that his fees should be calculated within the "first six months" slab from the date the secured creditor received possession, instead of from the liquidation commencement date. This contention was based on the secured creditor, Omkara Asset Reconstruction Pvt. Ltd., not relinquishing its security.
The liquidation process for Vipul S. Plastocrafts Pvt. Ltd. began on November 23, 2023, with assets auctioned on June 11, 2024, and September 24, 2024. The liquidator filed the appeal following the adjudicating authority's decision to compute the fees under the "second six months" slab, as both auctions occurred after six months but within one year of the liquidation commencement.
The NCLAT upheld the adjudicating authority’s decision, emphasizing that the calculation of fees must adhere strictly to the liquidation commencement date. The Tribunal clarified that the "first six months" period refers to six months from the date liquidation commenced, not from when possession was taken by the secured creditor. The decision confirmed that the appellant was entitled to fees based on the prescribed rates in the second slab, which includes 3.75% on the first 1 crore, 2.80% on the next 9 crores, and 1.88% on the balance amount.
This judgment reinforces the statutory framework governing the liquidation process under the Insolvency and Bankruptcy Code, 2016, ensuring clarity and consistency in the computation of liquidator fees. The Tribunal's decision underscores the importance of adhering to the specific timelines and provisions set forth in the IBBI Liquidation Process Regulations.
The NCLAT's ruling is expected to provide guidance to liquidators and stakeholders involved in insolvency proceedings, emphasizing the critical role of the liquidation commencement date in determining the applicable fee structure. The judgment highlights the Tribunal's commitment to upholding regulatory standards and ensuring fair practices in the liquidation process.
Bottom Line:
Liquidator's fee under Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016 is to be calculated based on the liquidation commencement date and not on the date possession is received by the secured creditor who has not relinquished its security.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016, Regulation 4(2)(b) of IBBI (Liquidation Process) Regulations, 2016.
