Tribunal Affirms Payment of Rs. 3,00,000 to Mohd Nazim Khan, Citing Commercial Wisdom of Creditors' Committee
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) has upheld the decision of the Committee of Creditors (CoC) regarding the remuneration of Mohd Nazim Khan, the Interim Resolution Professional (IRP) for Tarang Exports Private Limited. The tribunal affirmed the payment of Rs. 3,00,000 for Khan's services over a 16-month period, despite his appeal for a higher remuneration.
The appeal, filed by Khan, contested the decision of the CoC to fix his remuneration at a lump sum of Rs. 3,00,000, arguing it should have been a monthly payment of Rs. 1,50,000 based on his extended tenure as a "Deemed Resolution Professional." Khan's contention was rooted in a misinterpretation of the CoC's decisions and the regulatory framework governing IRP remuneration.
The NCLAT's judgment emphasized the non-justiciable nature of the CoC's commercial decisions, particularly in financial matters like remuneration. The tribunal clarified that while the CoC's decisions should be fair and transparent, they are not subject to judicial review unless they violate statutory provisions.
The judgment also addressed Khan's reliance on the newly introduced Regulation 34B of the IBBI (CIRP) Regulations, 2016, which prescribes minimum monthly fees for IRPs. The tribunal noted that this regulation could not be applied retrospectively and did not aid Khan's case, as it was introduced after his tenure ended.
Furthermore, the NCLAT acknowledged the CoC's authority to assess the quantum and quality of work done by the IRP and to determine appropriate compensation. The tribunal recognized the CoC's decision to pay Khan Rs. 1,50,000 for the initial month and an additional Rs. 1,50,000 for the remaining tenure as reasonable, considering his contentious tenure and lack of cooperation with the CoC.
The tribunal also dismissed the appellant's claims of unjust treatment and emphasized the need for IRPs to align with the objectives of the Insolvency and Bankruptcy Code (IBC) and the directions of the CoC.
This ruling reinforces the principle that the CoC's commercial decisions, unless inherently arbitrary or malafide, should be respected and not subjected to judicial scrutiny. It also underscores the importance of clear communication and agreement on remuneration at the commencement of insolvency proceedings to avoid future disputes.
Bottom line:-
Commercial wisdom of the Committee of Creditors (CoC) is non-justiciable in matters of remuneration for an Interim Resolution Professional (IRP), but decisions must balance responsibilities towards all stakeholders, and the Adjudicating Authority has jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016, to determine professional fees where necessary.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 16, 22, 60(5)(c), Companies Act, 2013 Section 425, IBBI (CIRP) Regulations, 2016 Regulation 34B.
