NCLAT, New Delhi held that the liquidator's fees should be calculated based on the liquidation period determined by the NCLT.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Ajai Das Mehrotra (Technical Member) was hearing an appeal and observed that the liquidator's fees should be calculated based on the liquidation period determined by the NCLT, which excluded specific periods as directed by the Adjudicating Authority, ensuring compliance with Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016, and recent IBBI clarifications.
The Stakeholder Consultation Committee of M/s Punjab Basmati Rice Ltd., under liquidation, filed an appeal against the NCLT Chandigarh's order dated 01.09.2023. The NCLT had allowed the liquidator's application IA No. 1551 of 2023 and dismissed the Stakeholder Consultation Committee's application IA-1245 of 2023. The dispute centred on the liquidator's
fees governed by Regulation 4 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. This regulation stipulates that the liquidator's fees depend on the time taken to realize and distribute the liquidation assets.
The liquidation process for M/s Punjab Basmati Rice Ltd. began with a liquidation order on 18.12.2019, after the failure of the Corporate Insolvency Resolution Process (CIRP). An open auction held on 01.04.2023 sold the liquidation estate for Rs. 26.77 Crores against a reserve price of Rs. 25.00 Crores. The liquidation and distribution were completed on 02.05.2023. The liquidator calculated the liquidation period as 157 days, while the Stakeholder Consultation Committee calculated it as 213 days. The NCLT determined the period as 174 days after considering exclusions for delays caused by legal proceedings and COVID-19 lockdowns.
The main contention was the exclusion of certain periods from the liquidation timeline, impacting the calculation of the liquidator's fees. The NCLT excluded periods granted by orders dated 01.11.2021, 30.03.2022, and 02.02.2023, resulting in a recalculated liquidation period that favoured a higher fee for the liquidator. The Stakeholder Consultation Committee challenged the exclusion of 37 days from 03.10.2021 to 08.11.2021, arguing that this period was not covered by any exclusion order. However, the NCLT maintained that this period was implicitly included in the exclusion granted by the order dated 02.02.2023.
The NCLAT upheld the NCLT's order, noting that the exclusions granted by the Adjudicating Authority were valid and that the liquidator had acted diligently without prejudice to the stakeholders. The NCLAT referenced previous judgments supporting the exclusion of periods consumed by legal proceedings from the liquidation timeline. The appeal was dismissed, affirming the liquidator's entitlement to the fees based on the revised calculation of the liquidation period.
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