Continuation Of RP Till Appointment Of Liquidator Doesn't Contravene IBC: NCLT Chandigarh

Background Facts

Tara Chand Rice Mills Pvt. Ltd. was admitted into Corporate Insolvency Resolution Process ("CIRP"). Mr. Sameer Rastogi was appointed as the Interim Resolution Professional ("IRP") on 21.03.2018 and was later confirmed as the Resolution Professional on 03.05.2018. His fee was fixed at Rs. 4,00,000/- and other expenses.

The Resolution Professional had filed an application under Section 33(1) of Insolvency and Bankruptcy Code, 2016 ("IBC"), seeking liquidation of the Corporate Debtor. The matter was first listed for hearing on 20.12.2018. The Adjudicating Authority vide order dated 12.02.2019 had ordered liquidation of the Corporate Debtor. However, the Resolution Professional continued to manage the operation of Corporate Debtor upto the date of liquidation order i.e. 12.02.2019.

The original CIRP had concluded on 11.09.2018 and was extended upto 10.12.2018. The CoC had approved the professional fees of the Resolution Professional for the CIRP period or any extension thereof. The period from 11.12.2018 till the RP had managed the affairs of corporate debtor upto 12.02.2019, has been without any approval of the CoC. Thus the CoC did not pay the Resolution Professional for such extended period.

Therefore, Resolution Professional filed an application before Adjudicating Authority seeking direction to the Liquidator to pay its professional fees for the period of 21.12.2018 to 12.02.2019 amounting to Rs. 5,77,102/-. It was prayed that the said fees be paid as a part of Insolvency Resolution Process cost under Section 5(13) read with Section 23(1) of IBC; and the amount be paid to the Resolution Professional before any other amount to be distributed as per Section 53 of IBC on priority basis.

Issue

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

Decision Of NCLT

The Bench observed that in the absence of any order from this Adjudicating Authority appointing a liquidator, the Resolution Professional's continuation in its position was not in contravention of any provisions of IBC. Reliance was placed on NCLAT judgment in CoC of M/s. Smartec Build Systems Pvt. Ltd. Vs. B. Santosh Babu & Ors., [2020] ibclaw.in 10 NCLAT wherein it was held:

"Admittedly, Mr. B. Santosh Babu performed the duty of the 'Interim Resolution Professional' and constituted the 'Committee of Creditors' and thereafter, continued to function even beyond 30 days with designation of the 'Interim Resolution Professional' and as he moved an application for liquidation (though designated "continue as Interim Resolution Professional"), we agree with the observations made by the Adjudicating Authority 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."

The Bench observed that Corporate Debtor is already under liquidation. The Liquidator was directed to disburse the professional fee of Resolution Professional at the rate approved by CoC for the period from 21.12.2018 to 12.02.2019 i.e., upto the period ending with order of liquidation. The said amount must be disbursed to erstwhile Resolution Professional before any other amount to be distributed as per Section 53 of IBC, as the said fees comes under the heading under Section 5(13) i.e., insolvency resolution process cost.

The application was disposed off.

Case Title: Brij Lal Ashok Kumar v Tara Chand Rice Mills Pvt. Ltd.

Case No.: CP (IB) No.121/Chd/Hry/2017

Counsel For the Applicant: Mr. Dhrubajit Saikia, Advocate

Counsel For the Respondent: Mr. Pulkit Goyal, Advocate

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