Monday 14 December 2020

Nawal Kishore Prasad Vs Hospitech Management Consultants Pvt Ltd - Fee and Expenses of IRP/RP for the lockdown period.

NCLT New Delhi-V (13.07.2020) In Nawal Kishore Prasad Vs Hospitech Management Consultants Pvt Ltd [IB-1639/ND/2019 1A/2394/ND/2020 1A/2383/ND/2020 ] held that; In our considered view, when a person is engaged to perform the duty then he is entitled to get the fee and accordingly, the fee and expenses of the IRP/RP was approved by the CoC, therefore, only on the ground that during lockdown period no work has been done by the IRP/RP, the person cannot be debarred from claiming the fee, if it is approved by the committee of creditors, so, we find no force in the contention raised by the Ld. Counsel for Corporate Debtor that IRP/RP is not entitled to get the fee and expenses for the lockdown period.

Excerpts of the order;

IA-2394/2020: 

# 1. The present application is filed for submissions of Status report by Mr. Kumud Shekhar, Resolution Professional, in respect of second meeting of Committee of Creditors of Hospitech Management Consultants Pvt. Ltd. In the status report it is specifically mentioned that after the disposal of the Company Appeal (AT) Insolvency No. 219/2020 on 10.06.2020, the second CoC meeting was held on 13.06.2020 through VC and in that meeting, it was resolved that RP shall file form FA after the CIRP cost till 25th June 2020, is paid by the Corporate Debtor to withdraw the CIRP which is amounted to Rs. 17,75,638/ 


IA-2383/2020: - 

# 2. The present application is filed under Section 60(5) of the IBC, 2016 read with Rule 11 of the NCLT Rules, 2016 and Section 12 A of IBC, 2016 read with Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 seeking directions in company petition (IB) No. 1639/ND/2019 titled Nawal Kishore Prasad Vs. Hopitech Management Consultants Pvt. Ltd. 


# 3. Since, both the IAs are related with each other, therefore, we would like to dispose off both the IAs with this common order. 


# 4. We have heard the Ld. Counsel for petitioner/Corporate Debtor as well as RP and perused the averments made in both the applications. 


# 5. Ld. Counsel for petitioner submitted that Corporate Debtor had preferred an appeal against the order dated 27.01.2020 passed by this Adjudicating Authority and in that appeal the Hon'ble NCLAT passed the following order: - 

  • “We accordingly dispose of this appeal giving liberty to the Corporate Debtor to approach the Committee of Creditor through IRP for permitting the Operational Creditor to withdraw the application in view of settlement stated to have been arrived at, inter-se the Operational Creditor and the Corporate Debtor. The appeal is accordingly disposed off. The interim directions shall stand vacated.” 


# 6. He further submitted that further in pursuant of said direction, the present application is filed by the Director of the suspended Board and hereinafter, through present application, the applicant seeks directions inter alia for fixing reasonable and realistic cost incurred for the purpose of Regulation 31(c) and (d) by the respondent/RP as the respondent/RP is harassing the applicant by demanding arbitrary, unreasonable and preposterous Corporate Insolvency Professional Process cost of Rs. 3,50,000/- per month plus the expenses even though the entire country since 25.03.2020 is under lockdown and businesses are suffering and the companies are not in the best of financial situations and the applicant's company which is an MSME is not in best of the financial position. Furthermore, for the period 05.03.2020 till 10.06.2020 (which includes the lockdown period due to COVID-19 pandemic), practically, no services were rendered or required concerning the CIRP of the Corporate Debtor. ……….


# 15. At this juncture, we would like to refer Regulation 34 of IBBI (Insolvency Resolution Process for Corporate Person) Regulation 2016 and same is quoted below: - 

  • "The committee shall fix the expenses to be incurred on or by the resolution professional and the expenses shall constitute insolvency resolution process cost. 

Explanation :- For the purpose of this regulation”expense“ include the fee to be paid to the resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals if any, and other expense to be incurred by the resolution Professional.” 


# 16. In view of the aforesaid regulation the fee and expenses shall be fixed by the committee of creditor and not by adjudicating authority, and here in the case in hand it is not the case of applicant that fee and expenses are not approved by the committee of creditor rather the case of the applicant is that fee of Resolution professional is exorbitant, therefore, in view of aforesaid regulation this adjudicating authority is unable to accept the contention of the applicant of IA 2383/2020. 


# 17. In our considered view, when a person is engaged to perform the duty then he is entitled to get the fee and accordingly, the fee and expenses of the IRP/RP was approved by the CoC, therefore, only on the ground that during lockdown period no work has been done by the IRP/RP, the person cannot be debarred from claiming the fee, if it is approved by the committee of creditors, so, we find no force in the contention raised by the Ld. Counsel for Corporate Debtor that IRP/RP is not entitled to get the fee and expenses for the lockdown period. 


# 19. Mere plain reading of the provisions show that as per regulation 30A, after constitution of the COC, the applicant must filed application for withdrawal u/s 12A of IBC through IRP/RP and that is the reason Hon'ble NCLAT directed the corporate debtor to approach the Committee of Creditor through IRP for permitting the Operational Creditor to withdraw the application in view of settlement stated to have been arrived at, inter-se the Operational Creditor and the Corporate Debtor. Hence we are of the considered view that since the applicant directly filed the present application , therefore, same is not maintainable. Accordingly, we hereby DISMISSED the IA-2383/2020 . 


# 20. So far IA -2394 is concerned, Corporate Debtor is directed to file bank guarantee of Rs. 17,75,638/- in favour of RP, thereafter, RP is directed to file an withdrawal application, which shall be considered in accordance with the provision of law. With this order IA-2394 is disposed off.


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The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.