NCLT Cuttack (10.01.2020) In State Bank of India Vs Adhunik Metaliks Ltd. [CA No. 118/ CTB/20l9 Connected with TP No. 44/CTB/20l9 Arising out of CP (IB) No. 373/KB/ 2017] held that; the claims received during the period between l8th July 2018 till 7th July 2019 (i.e. implementation period of failed resolution plan) can neither be treated as a part of "insolvency resolution process costs" nor do they fall within the ambit of "liquidation cost" and hence, cannot be accorded priority over other dues in terms of the provisions of the law.
Excerpts of the order;
# 2. The applicant herein, is the Liquidator of the Corporate Debtor Company and was so appointed when the liquidation order was passed on 8th of July 2019 by this Bench. Vide the aforesaid application, the applicant has sought clarity about the treatment of claims received on and from the period between 18th July 2018 till 7th July 2019 when the company was supposed to be revived under the resolution plan approved on 17th July, 2018.
# 3. At the instance of State Bank of India/Financial Creditor, Corporate Insolvency Resolution Process (CIRP) of Adhunik Metaliks Limited/Corporate Debtor was initiated by an order dated 03.08.2017 as passed by the concerned Adjudicating Authority, Kolkata Bench. Pursuant thereto, in accordance with the Code, the Resolution Plan of the successful Resolution Applicant was approved by the Committee of Creditors (CoC) and the same was approved by the Kolkata Bench of the Tribunal vide Order dated 17th July 2018. Liberty House Group Pte Ltd., therein was the Successful Resolution Applicant. Subsequently, a Monitoring Committee was formed and constituted in accordance with the Resolution Plan as approved under Section 31 of IBC.
# 4. The Applicant submits that, Liberty House Group Pte Ltd., the Successful Resolution Applicant, herein had failed to implement theResolution Plan and a period of almost one year had elapsed from the date of approval of the resolution plan and that there are various costs which have accrued during the aforesaid period when the Monitoring Committee was in charge of the Corporate Debtor, which includes costs incurred and accrued for salary of workmen/employee, admin costs, unpaid costs to security personnel and other professional fees of auditors etc. although the plant and business operations was shut from May 2018.
# 5. Applicant further submits that such costs were accrued in view of the hope of the revival of the Corporate Debtor as a going concern but the successful resolution applicant allegedly failed to implement the resolution plan which was binding on it and other stakeholders for almost a year after which the Liquidation of the Corporate Debtor has commenced.
# 6. Accordingly, by order dated 8th July 2019 of this Adjudicating Authority, the Company was sent to liquidation and thereafter the present applicant was appointed as the Liquidator. The liquidation order dated 8th July 2019 was challenged and an interim order of stay of the operation of the said order was passed on 17th July 2019 which was eventually set aside on 28th August 2019. On and from that date, the liquidation process is being carried out.
# 7. The applicant states that several claims as on the liquidation commencement date have been received by the applicant which includes amount accrued and under for the period between l8th July 2018 till 7th July 2019 (hereinafter referred to as "the non-implementation period").
# 8. As per the averments, while submitting their claims for the aforesaid period, there have been verbal enquiries to the applicant specially from workmen and employees as to the treatment of their dues accrued during the aforesaid non implementation period in the distribution pattern laid down under Section 53 of IBC and whether the same should be treated as priority over other dues.
# 9. The applicant states that for the period between 18th July 2018 till 7th July 2019 i.e. the period after the lapse of Corporate Insolvency Resolution Process and before the commencement of liquidation, the Monitoring Committee was in charge and has incurred costs. Details of such costs have also been provided as Annexure-A to the application.
# 10. The present applic{tion is for clarification in regard to treatment of aforesaid claims of work men and employees and such other claims which have accrued during the non-implementation period and that whether the same should have priority over other dues.
# I1. In this regard, it has been noted that the distribution pattern of the assets and the order of priority have been specified under Section 53 of IBC. Further, the "insolvency resolution process costs" and "liquidation costs" have been defined in the following manner:
Under sub-section 13 of Section 5 of IBC, insolvency resolution process costs mean-
(a) The amount of any interim finance and the costs incurred in raising such finance;
(b) The fees payable to any person acting as a resolution professional;
(c) Any costs incurred by the resolution professional as running the business of the corporate debtor as a going concern;
(d) Any costs incurred at the expense of the Government to facilitate the insolvency resolution process;
(e) Any other costs as maybe specified by the Board."
"Under subsection 16 of Section 5 of IBC - Liquidation cost means any cost incurred by the Liquidator during the period of liquidation subject to such regulations, as may be specified by the Board."
# 12. In furtherance to the aforesaid provisions, Regulation 2(1) (ea) and regulation 7(l) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 20L6, state as under:
2(l){(ea) " liquidation cost" under sub-section (16) of Section 5 means-
(i) fee payable to the liquidator under regulation a;
(ii) remuneration payable by the liquidator under sub-regulation (1) of regulation 7;
(iii) costs incurred by the liquidator under sub-regulation (2) of 24;
(iv) costs incurred by the liquidator for preserving and protecting the assets, properties, effects and actionable claims, including secured assets, of the corporate debtor;
(v) costs incurred by the liquidator in carrying on the business of the corporate debtor as a going concern;
(vi) interest on interim finance for a period of twelve months or for the period from the liquidation commencement date till repayment of interim finance, whichever is lower;
(vii) the amount repayable to contributories under sub-regulation (3) of regulation 24;
(viii) any other cost incurred by the liquidator which is essential for completing the liquidation process:
Provided that the cost, if any, incurred by the liquidator in relation to compromise or arrangement under Section 230 of the Companies Act, 2014 ( I 8 of 2073), if any, shall not form part of liquidation cost.l
Further, regulation 7 (1) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 states that - "A liquidator may appoint professionals to assist him in the discharge of his duties, obligations and functions for a reasonable remuneration and such remuneration shall form part of the liquidation cost."
# 13. In view of the above proposition, the claims received during the period between l8th July 2018 till 7th July 2019 can neither be treated as a part of "insolvency resolution process costs" nor do they fall within the ambit of "liquidation cost" and hence, cannot be accorded priority over other dues in terms of the provisions of the law.
# 14. However, in respect of the aforesaid claims received during the period between 18th July 2018 till 7th July 2019 applicant may rely on the statutory treatment of claims as laid down in Section 53 of IBC, which reads as follows: . . . . . .
15. Accordingly, CA No. 118/CTB 12019 is disposed of.
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