NCLT Rules IRP Not Entitled to Fees During Stay Period in CIRP Proceedings
NCLT Rules IRP Not Entitled to Fees During Stay Period in CIRP Proceedings
Introduction
The National Company Law Tribunal (NCLT), Bengaluru Bench, has ruled that an Interim Resolution Professional (IRP) or Resolution Professional (RP) cannot claim fees or expenses incurred during a stay of Corporate Insolvency Resolution Process (CIRP) proceedings granted by NCLAT or any judicial forum.
Factual Background
The CIRP of a corporate debtor began following a Section 7 petition, and an IRP was appointed. However, the NCLAT stayed the proceedings shortly after the appointment. The parties later reached a one-time settlement, leading NCLAT to close the CIRP and dispose of the appeal.
Procedural Background
The IRP filed an application seeking professional fees and legal expenses totaling Rs 10,67,923. The IRP also requested directions for filing Form FA, necessary for withdrawal of the company petition. The corporate debtor countered that the CIRP was stayed within a week and no substantive work was performed, making fees during the stay period unjustified.
Contentions of the Parties
IRP's Contention: The IRP argued that the settlement does not eliminate the liability to pay CIRP costs and that Section 12A of the IBC requires full payment before withdrawal.
Corporate Debtor's Contention: The corporate debtor contended that fees during the stay period were not justified and that Form FA was unnecessary, as NCLAT itself modified the order and closed the CIRP.
Issues
1. IRP Fees During Stay: Whether an IRP or RP can claim fees or expenses incurred during a stay of CIRP proceedings.
2. Necessity of Form FA: Whether Form FA is necessary for withdrawal of the company petition in this case.
Reasoning & Analysis
The bench of Sunil Kumar Aggarwal (Member-Judicial) and Radhakrishna Sreepada (Member-Technical) observed that once the CIRP proceedings are stayed, the IRP or RP cannot take further action, and no fees should be paid for the inactive period. The bench noted that the CIRP was closed in line with NCLAT’s order, and no Committee of Creditors (CoC) was formed, making Form FA unnecessary. However, the tribunal acknowledged the limited activities performed by the IRP between the admission of the CIRP and the stay.
Implications
The NCLT's ruling clarifies that IRP or RP fees are not payable during a stay of CIRP proceedings. This decision has significant implications for the insolvency resolution process and the role of IRPs and RPs.
Conclusion
The NCLT's decision partly allowed the IRP's appeal, awarding Rs 1,50,000 payable by the corporate debtor for the limited activities performed by the IRP. This ruling provides clarity on the payment of IRP fees during a stay of CIRP proceedings.
