S3 Electricals and Electronics Private Limited Vs Brian Lau & Anr. - In absence of approval of CoC, fees & expenses of IRP are to be borne by applicant/creditor.

Supreme Court of India (05.08.2019) in S3 Electricals and Electronics Private Limited Vs Brian Lau & Anr. [Civil Appeal No. 103 of 2018] held that; We are informed that, in this case, no Committee of Creditors was ever appointed as the interim resolution process did not reach that stage. In these circumstances, it is clear that whatever the Adjudicating Authority fixes as expenses will be borne by the creditor who moved the application.

Excerpts of the order;

We have been shown Regulation 33 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process forCorporate Persons) Regulations, 2016, which reads as follows:-

• “33. Costs of the interim resolution professional.- 

• (1) The applicant shall fix the expenses to be incurred on or by the interim resolution professional.

• (2) The Adjudicating Authority shall fix expenses where the applicant has not fix expenses under sub-regulation (1).

• (3) The applicant shall bear the expenses which shall be reimbursed by the committee to the extent it ratifies. 

• (4) The amount of expenses ratified by the committee shall be treated as insolvency resolution process costs. 

• Explanation.- For the purposes of this regulation, “expenses” include the fee to be paid to the interim resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals, if any, and other expenses to be incurred by the interim resolution professional.”

A bare reading of Regulation 33(3) indicates that the applicant is to bear expenses incurred by the RP, which shall then be reimbursed by the Committee of Creditors to the extent such expenses are ratified. We are informed that, in this case, no Committee of Creditors was ever appointed as the interim resolution process did not reach that stage. In these circumstances, it is clear that whatever the Adjudicating Authority fixes as expenses will be borne by the creditor who moved the application.

In this view of the matter, the impugned judgment dated 02.08.2017 is set aside only to the extent that these expenses are to be paid by the Corporate debtor. The appeal is allowed to the

aforesaid extent.

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