NCLAT Rules CoC Alone Can Fix RP Fees, Sets Aside NCLT’s Reduction as Without Jurisdiction

NCLAT Rules CoC Alone Can Fix RP Fees, Sets Aside NCLT’s Reduction as Without Jurisdiction

Introduction

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has held that the power to determine the fees of an Interim Resolution Professional (IRP) or Resolution Professional (RP) lies exclusively with the Committee of Creditors (CoC), and that the Adjudicating Authority can intervene only where no fee has been proposed by the applicant initiating CIRP.

A Bench comprising Justice Mohammad Faiz Alam Khan (Judicial Member) and Naresh Salecha (Technical Member) set aside the order of the National Company Law Tribunal (NCLT), which had reduced the RP’s fees, holding that such interference was beyond jurisdiction.

Factual Background

The dispute arose in the corporate insolvency resolution process (CIRP) of Crystal Clear Veg Oil Refinery Pvt. Ltd. Minita D. Raja, the erstwhile Resolution Professional, had been appointed to conduct the CIRP and claimed that her fees had initially been fixed by the CoC at ₹2.5 lakh per month, later renegotiated to ₹2 lakh per month. Subsequently, the NCLT reduced her fees to ₹50,000 per month in 2023, which was not challenged. However, by a later order dated July 25, 2024, the NCLT further reduced the fees to ₹10,000 per month. The appellant contended that this reduction was arbitrary and contrary to the Insolvency and Bankruptcy Code and applicable regulations.

Procedural Background

Aggrieved by the NCLT’s order reducing her fees, the Resolution Professional filed an appeal before the NCLAT. The NCLAT examined whether the Adjudicating Authority had jurisdiction to reduce the fees of the Resolution Professional in the absence of any recommendation from the Committee of Creditors.

Issues

1. Whether the Adjudicating Authority (NCLT) has jurisdiction to fix or reduce the fees of the Resolution Professional.

2. Whether the determination of fees forms part of the commercial wisdom of the Committee of Creditors.

3. Whether fees of the Resolution Professional are payable until approval of withdrawal under Section 12A of the IBC.

Contentions of the Parties

The appellant Resolution Professional contended that the reduction of her fees by the NCLT was without jurisdiction and contrary to the CIRP Regulations.

She submitted that she had continued to discharge her duties from the commencement of CIRP in April 2018 until January 30, 2024, when the corporate debtor was handed back to management following approval of withdrawal under Section 12A.

It was further argued that the CoC had already fixed her fees and that the Adjudicating Authority could not alter the same without any recommendation from the CoC.

The respondent bank opposed the appeal, contending that the Resolution Professional had delayed proceedings and that substantial CIRP expenses had already been incurred. It argued that fees should not be payable beyond the filing of the withdrawal application.

Reasoning and Analysis

The NCLAT examined the statutory framework under the Insolvency and Bankruptcy Code and the CIRP Regulations. It observed that under Regulation 33(2), the Adjudicating Authority is empowered to fix the expenses of the IRP only where the applicant initiating CIRP has not proposed the fee. The Tribunal held that once the fee is proposed and subsequently determined by the Committee of Creditors, it falls within the domain of the CoC’s commercial wisdom, and the Adjudicating Authority has no jurisdiction to interfere.

The Tribunal further clarified that the fees of the Resolution Professional form part of the insolvency resolution process costs under Regulation 31 and Regulation 34 of the CIRP Regulations. On the issue of duration of fees, the Tribunal rejected the NCLT’s view that fees were payable only up to the filing of the withdrawal application. It held that under Regulation 30A(7), CIRP expenses including RP fees are payable until the withdrawal is approved by the Adjudicating Authority.

The Tribunal emphasised that the Resolution Professional is duty-bound to continue performing functions until the corporate debtor is handed back, and therefore cannot be denied fees for that period.

Decision

The NCLAT set aside the impugned order of the NCLT reducing the Resolution Professional’s fees from ₹50,000 to ₹10,000 per month. It held that the Adjudicating Authority had exceeded its jurisdiction in interfering with the fees without any recommendation from the Committee of Creditors. The matter was remanded for fresh consideration in accordance with law.

In this case the appellant was represented by Advocates Sandeep Bajaj, Aakanksha Nehra, Maynk Biyani and Shubham Jaiswal and NS Aulakh.