Bhupesh Gupta Ex Liquidator Supreme Tex ... vs Mr Ravinder Kumar Goel Liquidator

[Arising out of the Order dated March 04, 2025, passed by the 'Adjudicating Authority' (National Company Law Tribunal, Chandigarh Bench) in IA 893/2020 in CP(IB) No.67/CHD/PB/2017]

IN THE MATTER OF: Bhupesh Gupta, Ex-Liquidator, Supreme Tex Mart Limited, 2181, Sector 38-C, Chandigarh-160036 ...Appellant

Versus

Mr. Ravinder Kumar Goel, Liquidator, Regd office: Supreme Tex Mart Limited, B-72, Focal Point, Phase VIII, Ludhiana -141010 Having office at Flat No.211, Platinum Tower, Peer Muchalla, Dhakoli, Sahibjada Ajit Singh Nagar, Punjab - 160104. ...Respondent

Present: For Appellant : Dr. Rajansh Thukral, Dr. Surekha Thukral, Mr. Sidharth Thukral and Mr. Shubham Gupta, Advocates.

For Respondent : Mr. Atul U Sood, Advocate for Liquidator.

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The present Appeal is filed by Mr Bhupesh Gupta, Ex-Liquidator of

Supreme Tex Mart Limited, under Section 61(1) of the Insolvency and

Bankruptcy Code, 2016 (IBC), read with Rules 11 and 19 of the NCLAT Rules,

2016, challenging the Order dated 04.03.2025 passed by the NCLT,

Chandigarh (AA), in IA No. 893/2020. The Impugned Order denies the

Company Appeal (AT) (Insolvency) No. 566 of 2025 1 of 41 Appellant any remuneration for his tenure as Liquidator, despite undisputed

service of over a year, substantial recoveries made during going concern

operations, and absence of any allegations of misconduct or inefficiency.

Brief facts of the matter

2. Before proceeding further, we are bringing the chronology of events as

captured below, leading to the present Appeal:

Date Particulars 29.09. 2017 Admission of Corporate Debtor into CIRP

11.10. 2017 to Appellant served as IRP / RP 07.08. 2018 08.08. 2018 Appellant served as liquidator to 31.10.2019 01.11.2019 By order of NCLT Chandigarh, Appellant was replaced as

liquidator on health grounds and present Respondent, Ravinder Kumar Goel, was appointed as Liquidator, taking the place of Appellant.

18.11.2020 IA 893/2020 filed by Appellant before NCLT Chandigarh for claiming liquidation fees from 08.08.2018

-31.10.2019

28.09. 2022 NCLT Chandigarh dismissed IA 893/2020 with the observations:

"No case has been made out by the Ex-Liquidator in the present case regarding any realization or distribution beyond the sale of one asset i.e. Toyota C.ar, and released an amount of Rs.2,60,000/-."

11.03. 2024 NCLAT New Delhi vide order dt. 11.03.2024 set aside NCLT order dt. 28.09. 2022, by directing as follows:

"The matter is remanded hack to the Learned Tribunal which restoring the application I.A. No. 893 of 2020. The parties are directed to appear before the Tribunal on 20.03.2023. It is made clear that the appellant shall give a break-up of the sales that has been made during the period of liquidation i.e. within six months, next 6 months, next one year etc. and the Tribunal shall take into consideration the sales effected by the Liquidator in terms of Clause 2.1 of the circulars dated 28.09.2023 and pass an appropriate order in accordance with law".

Company Appeal (AT) (Insolvency) No. 566 of 2025 2 of 41 25.04. 2024 Appellant filed an Affidavit (vide diary no.01810/4 dt.

25.04.2024) in furtherance of Hon'b1e NCLAT order dt. 11.03.2024 and as per the consequent direction by NCLT Chandigarh dt. 20.03.2024.

27.05. 2024 In response to the Appellant's Affidavit, a Counter Affidavit was filed by the present Liquidator vide diary no. 01810/6 dt. 27.05.2024.

08.07.2024 Then the Appellant filed a Response affidavit to the Counter Affidavit filed by the present Liquidator / Respondent.

12.11.2024 Part arguments were heard on 12.11.2024. Remaining 17.12.2024 arguments heard on 17.12.2024 and matter was reserved.

04.03.2025 NCLT Chandigarh passed Impugned order dt. 04.03.2025

3. Earlier, the AA had dismissed the same application by Order dated

28.09.2022, which was set later aside by this Appellate Tribunal in its Order

dated 11.03.2024, in Company Appeal (AT) (Ins) No. 1434 of 2022. The NCLAT

remanded the matter with a specific direction to consider the breakup of sales

of approximately ₹ 278.47 crores affected during liquidation and to re-

adjudicate the application accordingly. The orders of this Appellate Tribunal

are extracted as follows:

"....

2. ....

3. The appellant has thus worked as a Liquidator of the Corporate Debtor from 08.08.2018 to 01.11.2019 (for one year and 84 days).

4. ...

5. ..

6. ..

7. Counsel for the appellant has submitted that the case of the appellant is covered by the pre-amended Regulation 4 of the Regulations as his claim starts from 08.08.2018 and ends on 01.11.2019 whereas the amendment in Regulation 4 came into effect from 25.07.2019.

8. Counsel for the appellant has submitted that as per the un- amended provision of Regulation 4 (3), the Liquidator is entitled to a fee as a percentage of the amount realized, ..... He has also referred to a circular of the IBBI dated 28.09.2023 in which the word 'amount realized' has been explained/clarified. Clause 2.1 of the said circular read as under:

Company Appeal (AT) (Insolvency) No. 566 of 2025 3 of 41 "2.1 Amount realised: Regulation 4(2)(b) provides that the fee shall be "as a percentage of the amount realised net of other liquidation costs, and of the amount distributed for the balance period of liquidation...."

"Amount realised means an amount that is being realised from the sale of an asset where the asset changes form. .....

Clarification: 'Amount realised' shall mean amount realised from assets other than liquid assets such as cash and bank balance including term deposit mutual fund, quoted share available on start of the process after exploring compromise and arrangement, if any."

9. On the basis of the aforesaid, it is contended that it has now been clarified by the IBBI that 'amount realized' would mean the amount realized from the sale of the asset where the asset changes form. He has been candid enough to submit that where the asset is already liquid such as cash and bank balance including term deposits, mutual funds and quoted shares, then it would not be the realisation of the asset because it is already available for the purpose of distribution to the stakeholders.

10. ...

11. ...

12. We have heard counsel for the parties and after perusal of the record are of the considered opinion that there is an error in the approach of the Tribunal while rejecting the application filed by the appellant which deserves to be reconsidered in terms of the order being passed herein. The issue in the present case is that the appellant effected various sales during the period he remained the liquidator of the Corporate Debtor which has been set up by the appellant in the claim application filed before the present Liquidator in which it is shown that total amount of sale is Rs. 78,47,31,778/- and the appellant is accordingly entitled to the percentage of fee in respect of the sales effected in the first six months, next 6 months, next one year and thereafter etc.

13. However, this aspect of the matter has not been taken into consideration either by the present Liquidator or by the Ld. Tribunal whereas it is very much clear not only from Regulation 4 (3) (unamended provision) that the amount realized is to be considered but also from Circular dated 28.09.2023 by which the term "amount realized" has been further clarified which we have already mentioned hereinbefore.

14. Thus, in view of the aforesaid facts and circumstances, the present appeal succeeds and the impugned order is hereby set aside whereby the application filed by the appellant bearing I.A. No. 893 of 2020 has been dismissed. The matter is remanded back to the Learned Tribunal which restoring the application I.A. No. 893 of

Company Appeal (AT) (Insolvency) No. 566 of 2025 4 of 41 2020. The parties are directed to appear before the Tribunal on 20.03.2023. It is made clear that the appellant shall give a break- up of the sales that has been made during the period of liquidation i.e. within six months, next 6 months, next one year etc. and the Tribunal shall take into consideration the sales effected by the Liquidator in terms of Clause 2.1 of the circular dated 28.09.2023 and pass an appropriate order in accordance with law."

Submissions made by the Appellant

4. The amended definition of "liquidation cost" under Regulation 2(1)(ea),

as inserted via notification dated 25.07.2019, cannot be taken with

retrospective effect based on an IBBI circular dated 28.09.2023. A

subordinate legislation such as a circular cannot operate retrospectively to

alter vested rights or obligations unless expressly permitted by the parent

statute. In the present case, the Corporate Debtor ceased to carry on business

as a going concern on 31.03.2019 -- well before the amendment came into

force -- and, thus, all relevant facts, conduct, and financial events had

already crystallised under the then existing legal framework. Applying the

amended Regulation 2(1)(ea) retrospectively to include operational expenses

prior to 25.07.2019 as liquidation cost and, consequently, reducing the

Appellant's entitlement to zero, amounts to altering accrued benefits ex-post

facto and is legally untenable.

5. Appellant has relied on the decision of the Hon'ble Supreme Court in

(1987) 3 SCC PD Aggarwal and Ors vs State of UP and Ors, wherein it was

served that there is no cavil with the proposition that the government has the

power to make and amend rules giving retrospective effect.

Company Appeal (AT) (Insolvency) No. 566 of 2025 5 of 41

6. There were clear and binding directions issued by the NCLAT in its

Order dated 11.03.2024, wherein the Tribunal was specifically directed to

consider the sales revenue of ₹ 78.47 crores generated during the going

concern period as part of "realisation" for the purpose of calculating the

Appellant's remuneration under Regulation 4(3) of the IBBI (Liquidation

Process) Regulations, 2016. Despite the said direction, the AA rejected the

Appellant's claim solely on the ground that there was no "realisation," save

for a nominal amount from sale of a vehicle, thereby violating the scope and

spirit of the Remand Order. In para 19 of the Impugned Order dated

04.03.2025, the AA once again held that the only realisation was ₹ 2.6 lakhs

from the sale of a car, ignoring the entire turnover generated from operations,

contrary to the clear direction and ratio of the NCLAT. This constitutes non-

compliance with the binding Appellate Order and misapplication of Regulation

4(3).

7. The Impugned Order, dated 04.03.2025, has overstepped the scope of

remand as laid down by the NCLAT in its Order dated 11.03.2024. The NCLAT

had clearly directed that the AA reconsider the Appellant's claim for fees in

light of the ₹ 78.47 crores realisation during the going concern period, treating

the same as "realisation" under Regulation 4(3). Instead of complying with the

remand direction, the AA has dismissed the application based on a new

ground, that operational costs exceeded revenues, which was never raised

earlier nor permitted by the Appellate Order. By introducing a fresh basis for

adjudication and ignoring the binding remand scope, the AA has effectively

Company Appeal (AT) (Insolvency) No. 566 of 2025 6 of 41 re-written the NCLAT's judgment, which is impermissible in law and amounts

to exceeding its jurisdiction. It is well settled that a court or tribunal, while

exercising powers post-remand, cannot travel beyond the confines of the

remand order [KL Tripathi vs State Bank of India, AIR 1984 SC 273;

Narinder Nath vs Union of India, (1996) 8 SCC 54]. The Impugned Order,

therefore, deserves to be set aside on this ground alone.

8. The AA has interpreted the term "realisation" under Regulation 4(3) to

mean only proceeds from sale of assets in liquidation and has ignored the

substantial revenue generated by the Corporate Debtor during the period it

was operated as a going concern. Such a narrow interpretation defeats the

purpose of Regulation 4(3), which permits computation of the Liquidator's fee

based on realisation net of other liquidation costs, which includes sales

revenue generated from continuing operations. The Appellate Tribunal had

already held that the sales turnover of ₹ 78.47 crores must be treated as

"realisation." The AA's rejection amounts to non-compliance with the law laid

down by the Appellate Tribunal. Regulation 4(3) of the Liquidation

Regulations provides for the computation of Liquidator's fees as a percentage

of "amount realised net of other liquidation costs." The term "realisation"

includes all receipts earned during the liquidation period, including sales

generated through going concern operations. However, the AA in para 19

erroneously disregarded this sales turnover and misapplied Regulation 4(3).

Further, for the purpose of computation of realisation, neither the IBC nor

Rules/Regulations made thereunder, nor the IBBI (Liquidation Process)

Company Appeal (AT) (Insolvency) No. 566 of 2025 7 of 41 Regulations, 2016, intend to create a distinction between the classes or types

of assets under the liquidation estate of the Corporate Debtor. The distinction

between the current and the fixed assets under the IBC propounded by the

Respondent is purely fictional and non-est in the eyes of law. This restrictive

interpretation of "realisation" defeats the purpose of incentivising Liquidators

to operate the CD efficiently and maximise value.

9. The Appellant had specifically prayed that in the event Regulation 4(3)

is deemed inapplicable, the Tribunal may be pleased to lay down an

alternative criterion for determining the Appellant's fees for the period he

served as the Liquidator. However, the AA has completely failed to return any

finding or exercise its discretion in this regard. This amounts to non-

application of mind and denial of natural justice. It is a settled law that

judicial authorities must adjudicate upon all material prayers raised before

them. The Appellant had specifically prayed that if Regulation 4(3) is held

inapplicable, the AA may be pleased to lay down an alternative criterion for

fee computation. There is no discussion or finding regarding any alternative

mechanism for computing the Liquidator's fees. It is a settled principle, as

held in Union of India vs Mohan Lal Capoor [(1973) 2 SCC 836] and SN

Mukherjee vs Union of India [(1990) 4 SCC 594], that judicial orders must

deal with all material contentions and prayers. Failure to do so amounts to

non-application of mind and denial of natural justice.

10. The Appellant was appointed as the Liquidator and, under express

directions of the Tribunal, served as Liquidator of the CD for over a year and

Company Appeal (AT) (Insolvency) No. 566 of 2025 8 of 41 eighty-four days, managing substantial business operations, employees,

compliances, and stakeholders. During this period, he operated the CD as a

going concern under the direction of the AA, managed business operations,

coordinated with employees and vendors, ensured compliance, and

safeguarded assets. Despite this, he has been denied any remuneration

merely because the company incurred operational losses. Such a denial is

unjust and violates the Principle of Quantum Meruit under Section 70 of the

Indian Contract Act, 1872, which entitles a person to reasonable

compensation for non-gratuitous services. It is submitted that the main idea

behind the Principle of Quantum Meruit is that a person who has done certain

work deserves to be paid for that work. It does not matter whether there is a

legally enforceable contract or not. In this case the work has been assigned

by none other than AA, through an order of appointment, inter alia, to keep

the CD as a going concern and, AA, being the court of law, was bound to

award some compensation in some manner at least, if it felt that the

remuneration could not be paid as per Regulation 4(3) of IBBI (Liquidation

Process) Regulations, 2016.

11. In Mulamchand vs State of MP (1968) 3 SCR 214, the Supreme Court

held that the provisions of Section 175 (3) of the Government of India Act are

mandatory in character and based on public policy. Therefore, the formalities

that are stipulated when contracts are entered into on behalf of the

government cannot be waived or dispensed with. In dealing with a claim made

under Section 70 of the Contract Act, this Court then went on to hold:

Company Appeal (AT) (Insolvency) No. 566 of 2025 9 of 41 "...... In other words, if the conditions imposed by Section 70 of the Indian Contract Act are satisfied then the provisions of that section can be invoked by the aggrieved party to the void contract. The first condition is that a person should lawfully do something for another person or deliver something to him; the second condition is that doing the said thing or delivering the said thing he must not intend to act gratuitously; and the third condition is that the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof. If these conditions are satisfied, Section 70 imposes upon the latter person the liability to make compensation to the former in respect of, or to restore, the thing so done or delivered. The important point to notice is that in a case falling under Section 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract, nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something".

12. The Appellant claims that it is incorrect to hold that the entire

operational expenses incurred during the going concern period (eg, purchase

of raw materials, salaries, utilities, etc) constitute "liquidation costs" under

Regulation 2(1)(ea), without offsetting the substantial sales revenue generated

during that period. It is respectfully submitted that the true cost of keeping

the CD as a going concern is the net operational loss, i.e, operational costs

minus sales revenue, not the gross expenses alone. Including the gross

expenditure without adjusting for income grossly inflates the liquidation cost

and misrepresents the actual economic burden on the estate. This approach

is inconsistent with the value maximisation objective of the IBC and violates

the principle of Proportionality and Fairness. The interpretation with respect

to true cost of keeping CD as going concern is aligned with Regulation 2(1)(ea)

and the logic of Regulation 4(3), which speaks of netting liquidation cost

Company Appeal (AT) (Insolvency) No. 566 of 2025 10 of 41 against realisation. Treating gross operational expenses as liquidation costs

without adjusting for revenue creates a distorted picture of value and unfairly

penalises the Liquidator.

13. The Appellant also claims that there were opening balances of finished

stocks and debtors lying in the custody of CD on the date of commencement

of liquidation and even the realisation of the same has been arbitrarily ignored.

These opening balances of finished stocks and debtors have been realised by

the Appellant during the liquidation period for an amount of about ₹ 52 crores,

and there is no element of cost incurred during the liquidation period on the

realisations of such stocks and debtors. The AA has failed to appreciate on

merits that the Liquidator is entitled to fee on realisation of such assets,

forming a part of the liquidation estate of the CD.

14. The Appellant also contends that the fundamental purpose of the IBC

is to maximise the value of assets for the benefit of stakeholders. Running the

company as a going concern pursuant to the directions of AA itself, was

intended to preserve asset value and employee livelihood. Denying fees to the

Liquidator simply because the operations resulted in a net loss discourages

future Liquidators from undertaking going concern operations, thereby

undermining the very objective of the Code. Sections 20 and 35(1)(e) of the

IBC stress the importance of preserving the Corporate Debtor as a going

concern to ensure value maximisation. The Liquidator's actions were in

furtherance of this objective. Denying the fees amounts to a punitive action

and punishing the Liquidator for a bona fide effort to preserve and enhance

Company Appeal (AT) (Insolvency) No. 566 of 2025 11 of 41 value is solely because the operations resulted in a net loss this sets a

regressive precedent and undermines the Code's purpose.

15. Regulation 4(3) does not make the payment of Liquidator's fee

contingent upon net profitability or surplus realisation. Even in cases of lower

or no realisation, the Appellant is entitled to remuneration in accordance with:

• the slab-based structure of fees in the regulations • the value of services rendered, and • judicial directions that guided the Appellant's efforts • to deny fees based on the outcome, despite full compliance with duties, is unjust and inequitable.

To deny fees entirely based on the outcome, despite full compliance with

responsibilities and directions, is unfair, contrary to law, and will discourage

qualified professionals from accepting liquidation assignments in the future.

16. The Appellant claims that it had a legitimate expectation that his

appointment and continued performance as the Liquidator were governed by

the framework of the IBC and the Liquidation Regulations with respect to

payment of remuneration and he would be duly compensated for his

unblemished efforts. He undertook the assignment with the legitimate

expectation that his fees would be determined in accordance with the

prescribed slab under Regulation 4(3) and based on the realisations generated

during the liquidation, including from running the CD as a going concern and

other recoveries. Further, after the remand by the NCLAT vide Order dated

11.03.2024, which attained finality, the Appellant was entitled to expect that

the remand would be adjudicated strictly within the directions issued therein

Company Appeal (AT) (Insolvency) No. 566 of 2025 12 of 41

-- namely, by treating the ₹ 78.47 crores as "realisation" for the purposes of

Regulation 4(3). However, by introducing an altogether new ground and

denying the Appellant any fee, the AA has violated the Appellant's legitimate

expectation of fair adjudication, undermining both his economic interest and

the trust placed in the statutory process.

17. Supreme Court in Civil Appeal Nos. 7256-7259 of 2024 in the matter of

Army Welfare Education Society New Delhi vs Sunil Kumar Sharma &

Ors etc, in its judgment dated 09.07.2024 has dwelled at length on the law

relating to the Doctrine of Legitimate Expectation part (ii) of the judgment in

para 43 onwards and in para 48 culled out the features regarding the Doctrine

of Legitimate Expectation as under:

"48. A reading of the aforesaid decisions brings forth the following features regarding the doctrine of legitimate expectation:

a. First, legitimate expectation must be based on a right as opposed to a mere hope, wish or anticipation;

b. Secondly, legitimate expectation must arise either from an express or implied promise; or a consistent past practice or custom followed by an authority in its dealings;

c. Thirdly, expectation which is based on sporadic or casual or random acts, or which is unreasonable, illogical or invalid cannot be treated as a legitimate expectation;

d. Fourthly, legitimate expectation operates in relation to both substantive and procedural matters;

e. Fifthly, legitimate expectation operates in the realm of public law, that is, a plea of legitimate action can be taken only when a public authority breaches a promise or deviates from a consistent past practice, without any reasonable basis;

Company Appeal (AT) (Insolvency) No. 566 of 2025 13 of 41 f. Sixthly, a plea of legitimate expectation based on past practice can only be taken by someone who has dealings, or negotiations with a public authority. It cannot be invoked by a total stranger to the authority merely on the ground that the authority has a duty to act fairly generally."

18. The Appellant claims that its case squarely falls in the ambit of law

summarised by the Supreme Court with respect to payment of remuneration

for having worked for the CD on the directions of AA for a long period of one

year and eighty-four days, for which he is being denied any remuneration.

19. The Appellant also furnished a detailed statement of the various duties,

actions, and responsibilities performed during his tenure as Liquidator,

including:

i. Running the Corporate Debtor as a going concern for over a year ii. Managing business operations, employees, vendors, and customers iii. Ensuring compliance with statutory and regulatory obligations iv. Safeguarding and maintaining the asset base v. Coordinating with stakeholders and filing requisite reports

20. Appellant also claims that despite the comprehensive record of these

efforts, there was no rebuttal or challenge to the Appellant's submissions

either by the successor Liquidator or any of the stakeholders. Furthermore,

the AA did not make any adverse findings or observations regarding the

performance, conduct, or bona fides of the Appellant. In view of this, the

unchallenged record of services rendered stands admitted, and it clearly

establishes that the Appellant acted diligently and in good faith to preserve

the Corporate Debtor as a going concern and to maximise value for all

stakeholders. It is a settled principle of law that unchallenged and unrebutted

averments are deemed to be admitted, and where services have been rendered

Company Appeal (AT) (Insolvency) No. 566 of 2025 14 of 41 in accordance with the directions of the Tribunal and objectives of the IBC,

the Appellant is entitled to be reasonably and fairly compensated, regardless

of the eventual profitability or realisations. Failure to award any compensation

under these circumstances amounts to grave injustice and denial of natural

justice and warrants intervention by this Appellate Tribunal.

21. Appellant also claims that the basis for dismissal of the Appellant's

claim in the Impugned Order dated 04.03.2025 namely, that the operational

costs exceeded the realisations and therefore no fee is payable, was neither a

ground raised by the Respondents in the earlier round before the AA nor

argued before the NCLAT in the prior Appeal. This new basis was never

considered in the AA's earlier Order dated 28.09.2022, and there was no

Appeal against the NCLAT's Order dated 11.03.2024, which attained finality

and specifically remanded the matter for reconsideration of the Appellant's fee

in light of the ₹78.47 crores sales realisation. By entertaining and adjudicating

a fresh ground post-remand, the AA has exceeded its jurisdiction and

committed a grave procedural illegality that undermines the finality of

appellate directions and opens the door to endless litigation.

22. In addition to running the CD as a going concern, the Appellant claims

to be actively and successfully pursuing the recovery of various outstanding

government dues for the benefit of the liquidation estate. These include:

(1) Recovery of outstanding GST refunds amounting to ₹1,39,75,410/-

(2) Recovery of outstanding duty drawback of ₹ 4,60,386/- (3) Recovery of insurance claim amounting to ₹ 8,30,77,161/- (4) Recovery from PM Yojna Fund of ₹ 22,920/-

Company Appeal (AT) (Insolvency) No. 566 of 2025 15 of 41 These recoveries were directly attributable to the Appellant's efforts and have

been recorded in the Liquidation Progress Reports. However, the AA, in the

Impugned Order dated 04.03.2025, failed to make any reference to these

substantial realisations and recorded no reasoning as to why the Appellant is

not entitled to fees on such recoveries. These sums qualify to the assets of the

CD and qualify as "amount realised" within the meaning of Regulation 4(3) of

the IBBI (Liquidation Process) Regulations, 2016. Therefore, the Appellant is

rightfully entitled to Liquidator's fees as per the prescribed percentage slab.

The omission to adjudicate upon this critical component of the claim renders

the Impugned Order incomplete and unjust.

Submissions made by the Respondent

23. Respondent claims that the main contention of the Applicant in the

present Application is regarding his claim regarding fee/remuneration during

the period when the Applicant acted as Liquidator. In this regard it is

pertinent to note that the Applicant was appointed as Liquidator on

08.08.2018. The Applicant continued to hold office as the Liquidator up to

31.10.2019 for one year and eighty-four days, ie, from 08.08.2018 to

31.10.2019. During this period, the Applicant drew an amount of ₹ 31.09

lakhs as remuneration for acting in the capacity of Liquidator of the CD out

of the funds of the CD in liquidation.

24. The Appellant, while acting as Liquidator, drew his remuneration of

₹31 lakhs for the liquidation period out of the liquidation estate. It is

pertinent to mention here that no resolution was approved by the COC in

Company Appeal (AT) (Insolvency) No. 566 of 2025 16 of 41 COC meeting pertaining to the Liquidator's fee. However, the Appellant

continued to draw the same fee that he was charging in the capacity of

Resolution Professional without any authorisation from the COC.

25. IBBI had also issued show cause notice to the Appellant, Mr Bhupesh

Gupta, based on the findings of an inspection conducted by Inspecting

Authority in respect of the conduct of the Appellant as Liquidator of Supreme

Tex Mart Limited for drawing fee as Liquidator without any approval from the

COC in contraventions to Regulation 4(3) of IBBI (Liquidation Process)

Regulations, 2016, and various other provisions of the Code. IBBI observed

that where the Liquidator fees has not been decided by the COC during CIRP,

then the Liquidator is entitled to fee as per Regulation 4(3) of IBBI

(Liquidation Process) Regulations, 2016. The IBBI further observed that by

continuing to draw same fees in the capacity of Liquidator, as he was taking

in the capacity of RP, the Applicant has acted in contravention of the above

said regulation. Further, the IBBI ordered that the Applicant must deposit

an amount of ₹ 31,09,000/- in the liquidation estate of the CD. The IBBI also

observed that the Applicant is at liberty to claim Liquidator fee in accordance

with the provisions of Regulation 4(3) of the IBBI (Liquidation Process)

Regulations, 2016.

26. There is no explicit provision in IBC pertaining to any payment of

monthly remuneration to the Liquidator. Sections 34 (8) and (9) of the Code

deal with the fee to be paid to the Liquidator. The Liquidator shall be paid for

the conduct of liquidation proceedings in proportion to liquidation estate

Company Appeal (AT) (Insolvency) No. 566 of 2025 17 of 41 assets decided by the Board. Relevant portion of Section 34 of the Code has

been reproduced herein as under:

"Section 34. Appointment of Liquidator and fee to be paid- (8) An Insolvency Professional proposed to be appointed as a Liquidator shall charge such fee for the conduct of liquidation proceedings and in such proportion to the value of the liquidation estate assets, as may be specified by the Board.

(9) The fees for the conduct of the liquidation proceedings under sub-section (8) shall be paid to the Liquidator from the proceeds of the liquidation estate under Section 53."

27. It is further submitted that Regulation 4 of IBBI (Liquidation Process)

Regulations, 2016, specifically pertains to Liquidator's fee. As per this

provision, the set mechanism for determining the Liquidator's fee has been

given. Firstly, the Liquidator's fee shall be decided by the COC. Secondly, in

cases where the fee of the Liquidator has not been decided by the COC, the

Liquidator should draw the fee in accordance with Regulation 4 of IBBI

(Liquidation Process) Regulations, 2016, which deals with the Liquidator's

fee. The relevant provision has been reproduced herein:

"Regulation 4. Liquidator's fee-

(1) The fee payable to the Liquidator shall form part of the liquidation cost

(2) The Liquidator shall be entitled to such fee and in such manner as has been decided by the COC before a liquidation order is passed under Sections 33 (1) (a) or 33 (2)

(3) In all cases other than those covered under sub-regulation

(4) The Liquidator shall be entitled to a fee as a percentage of the amount realised net of other liquidation costs, and of the amount distributed

(5) The Liquidator shall be entitled to receive half of the fee payable on realisation under sub-regulation (3) only after such realised amount is distributed. Therefore, it is clear from the above provisions that where COC fails to approve the Liquidator's fee, the fee payable to the Liquidator for his services shall be ascertained in

Company Appeal (AT) (Insolvency) No. 566 of 2025 18 of 41 the manner provided in the table given under Regulation 4(3) IBBI (Liquidation Process) Regulations, 2016."

28. In the present application, where Liquidator fee was not decided by

COC, the Applicant is entitled to fee as a percentage of amount realised net

of liquidation cost as per Regulation 4(3) of IBBI (Liquidation Process)

Regulations, 2016. And the Applicant shall be paid on realisation of entire

assets of the CD as per Section 53 (3) of the IBC.

29. Appellant claims a fee of ₹ 111.11 lakhs presuming the CD is liquidated

for ₹ 159.17 crores. However, as per Respondent the said claim does not have

any legal basis. As per the regulations mentioned above, the Appellant is

entitled to be paid as per the amount realised from the assets of the CD

during his period of acting as Liquidator. However, factually during the

tenure of Appellant only one asset being a Toyota car was sold and an amount

of ₹ 2,60,000/- was realised for the same.

30. The Appellant further claims a fee based on the sales and realisation

made in due course of business during the period when CD was being run

as a going concern. However, it is submitted that there is no provision in law

for any fee to be paid to a Liquidator for sales and realisation made during

the period of CD being run as a going concern, including current assets, if

any. The Code and the regulations only provide for fee to Liquidator pursuant

to sale and realisation of assets of CD, where the provision for sale of assets

is provided in Regulation 32 of IBBI (Liquidation Process) Regulations, 2016.

Company Appeal (AT) (Insolvency) No. 566 of 2025 19 of 41

31. In any case, the IBBI Order dated 21.04.2020 against the Applicant

has not been set-aside by any authority till date and the same still holds

ground. By way of present application, the Applicant is trying to question the

legality and validity of the said IBBI Order.

32. In this regard the present Liquidator also sent an email on 19.11.2020

requesting the Applicant to deposit the amount of ₹ 31,09 lakhs pursuant to

IBBI Order dated 21.04.2020, however, the same has not been deposited till

date. It is further submitted that the present Liquidator is only acting as an

officer of the Tribunal to assist in the best possible manner by apprising this

Tribunal with the applicable legal provisions and the present Liquidator is

not denying the claim of Applicant for any personal gain or for any reason

which is not as per law. This Tribunal may decide the present application as

per the applicable laws.

Appraisal:

33. In this case the Appellant-Ex-liquidator had sought determination of

his fee for the period he was working as Liquidator, as nothing was being

paid to him even after the case was remanded by this Appellate Tribunal to

the AA. Appellant-Ex-liquidator's prayers are noted as below:

"1. Set aside the impugned order dated 04.03.2025 passed by the Hon'ble NCLT.

2. Declare that the sales revenue of Rs. 78.47 crore together with other recoveries made by the Appellant constitutes "realisation"

under Regulation 4(3) and pass an appropriate order directing the Respondent (successor Liquidator) to pay the Appellant liquidator's fee out of the liquidation estate, based on realizations attributable to the Appellant's tenure and recoveries made by him.

Company Appeal (AT) (Insolvency) No. 566 of 2025 20 of 41

3. Alternatively, lay down a fair and reasonable basis for computing the Appellant's fees for the services rendered that may be identical with the fees paid to the Appellant and his team during CIRP.

4. Pass such other orders as may be just and proper in the facts and circumstances of the case."

34. Both Appellant-ex-Liquidator and the present liquidator have made

claims and counterclaims with respect to fees for ex-Liquidator which are

being summarised in tabular form as below:

Claims of the Claims of the Appellant-ex Liquidator Respondent-Liquidator NCLAT in its Order dated Appellant claims a fee of ₹ 11.03.2024, had directed to 111.11 lakhs presuming the CD consider the sales revenue of ₹ is liquidated for ₹ 159.17 78.47 crores generated during crores. However, the said claim the going concern period as part does not have any legal basis. of "realisation" for the purpose of calculating the Appellant's Appellant is entitled to be paid remuneration under Regulation as per the amount realised from 4(3) the assets of the CD during his period of acting as Liquidator.

AA rejected the Appellant's claim And during the tenure of solely on the ground that there Appellant only one asset being was no "realisation," save for a a Toyota car was sold and an nominal amount from sale of a amount of ₹ 2,60,000/- was vehicle. realised for the same.

Impugned Order dated 04.03.2025, has overstepped the scope of remand as laid down by the NCLAT in its Order dated 11.03.2024.

AA dismissed the application based on a new ground, that operational costs exceeded revenues, which was never raised earlier nor permitted by the Appellate Order.

AA has effectively re-written the NCLAT's judgment.

Company Appeal (AT) (Insolvency) No. 566 of 2025 21 of 41 AA has interpreted the term There is no provision in law for "realisation" under Regulation any fee to be paid to a 4(3) to mean only proceeds from Liquidator for sales and sale of assets in liquidation and realisation made during the has ignored the substantial period of CD being run as a revenue generated by the CD going concern, including during the period it was current assets, if any. operated as a going concern. Such a narrow interpretation The Code and the regulations defeats the purpose of only provide for fee to Regulation 4(3) which permits Liquidator pursuant to sale and computation of the Liquidator's realisation of assets of CD, fee based on realisation net of where the provision for sale of other liquidation costs, which assets is provided in Regulation includes sales revenue 32 of IBBI (Liquidation Process) generated from continuing Regulations, 2016 operations. IBBI had also issued show The Appellate Tribunal had cause notice to the Appellant already held that the sales based on the findings of an turnover of ₹ 78.47 crores must inspection conducted by be treated as "realisation." Inspecting Authority in respect of the conduct of the Appellant Net realization was as Liquidator of CD for drawing ₹81,38,63,787. fee as Liquidator without any approval from the COC in contraventions to Regulation 4(3) of IBBI & other provisions of the Code. IBBI further observed that by continuing to draw same fees in the capacity of Liquidator, as he was taking in the capacity of RP, the Applicant has acted in contravention of the abovesaid regulation. IBBI also ordered that the Applicant must deposit an amount of ₹ 31,09,000/- in the liquidation estate of the CD. IBBI Order dated 21.04.2020 against the Applicant has not been set-aside by any authority till date and the same still holds ground.

By way of present application, the Applicant is trying to question the legality and validity of the said IBBI Order.

Claims that liquidation cost is As per the Tally Data provided by not ₹ 1,25,11,89,961.02. the Appellant, it has failed to

Company Appeal (AT) (Insolvency) No. 566 of 2025 22 of 41 take into account the following Liquidation costs:

 Amount paid towards total Purchases made: ₹ 98,24,35,228.63  Indirect expenses incurred by Appellant: ₹ 20,46,30,993.35  Direct expenses incurred by Appellant: ₹ 6,41,23,739.04  Total: ₹ 1,25,11,89,961.02.

Relying on Audit Report (placed Reliance is misconceived as the on record by IA 1323 / 2023) Audit Report pertains to only claims that unpaid liquidation cost. Claims liquidation cost is just that it is unpaid amount out of ₹7,97,02,365 total purchases made during liquidation period for ₹98,24,35,228.63. The true cost of keeping the CD If the version of Appellant is to be as a going concern is the net considered, i.e., Net realization is operational loss, ie, operational ₹81,38,63,787 and the costs minus sales revenue, not Liquidation Cost is only the gross expenses alone. ₹7,97,02,365, then it will amount to a Profit of Including the gross expenditure ₹ 73,41,61,422, without adjusting for income which it claims to be highly grossly inflates the liquidation unrealistic. cost. Treating gross operational expenses as liquidation costs without adjusting for revenue creates a distorted picture of value and unfairly penalises the Liquidator. Opening balances of finished Even if it is assumed that the stocks and debtors have been said sales can be considered as realised by the Appellant during Realisation for the purpose of the liquidation period for an Regulation 4 as aforesaid to amount of about ₹ 52 crores, determine the fees of Liquidator, and there is no element of cost then also the same can be incurred during the liquidation determined only after excluding period on the realisations of the Liquidation Cost, which in such stocks and debtors. present case is Liquidator is entitled to fee on ₹1,25,11,89,961.02 and once realisation of such assets, this is deducted from the forming a part of the liquidation purported realisations stated to estate of the CD be made by Applicant, then nothing remains as realisation for which any fees can be paid in terms of Regulation 4.

Company Appeal (AT) (Insolvency) No. 566 of 2025 23 of 41

35. Appellant claims that the amended definition of "liquidation cost"

under Regulation 2(1)(ea), as inserted vide notification dated 25.07.2019,

cannot be taken with retrospective effect based on an IBBI circular dated

28.09.2023. It is also claimed that a subordinate legislation such as a

circular cannot operate retrospectively to alter vested rights or obligations

unless expressly permitted by the parent statute. In the present case, the

Corporate Debtor ceased to carry on business as a going concern on

31.03.2019 -- well before the amendment came into force -- and, thus, all

relevant facts, conduct, and financial events had already crystallised under

the then existing legal framework. Applying the amended Regulation 2(1)(ea)

retrospectively to include operational expenses prior to 25.07.2019 as

liquidation cost and, consequently, reducing the Appellant's entitlement to

zero, amounts to altering accrued benefits ex-post facto and is legally

untenable. It is also claimed by the Appellant that the AA was specifically

directed by this Appellate Tribunal to consider the sales revenue of ₹ 78.47

crores generated during the going concern period as part of "realisation" for

the purpose of calculating the Appellant's remuneration under Regulation

4(3) of the IBBI (Liquidation Process) Regulations, 2016. Despite the said

direction, the AA rejected the Appellant's claim solely on the ground that

there was no "realisation," save for a nominal amount from sale of a vehicle,

thereby violating the scope and spirit of the Remand Order. It is claimed by

the Appellant that the AA has interpreted the term "realisation" under

Regulation 4(3) to mean only proceeds from sale of assets in liquidation and

has ignored the substantial revenue generated by the Corporate Debtor

Company Appeal (AT) (Insolvency) No. 566 of 2025 24 of 41 during the period it was operated as a going concern and such a narrow

interpretation defeats the purpose of Regulation 4(3), which permits

computation of the Liquidator's fee based on realisation net of other

liquidation costs, which includes sales revenue generated from continuing

operations. Furthermore, it is the claim of the appellant that the term

"realisation" includes all receipts earned during the liquidation period,

including sales generated through going concern operations. It also claims

that the AA disregarded this sales turnover and misapplied Regulation 4(3).

It is also claimed that for the purpose of computation of realisation, neither

the IBC nor Rules/Regulations made thereunder, nor the IBBI (Liquidation

Process) Regulations, 2016, intend to create a distinction between the classes

or types of assets under the liquidation estate of the Corporate Debtor. The

distinction between the current and the fixed assets under the IBC

propounded by the Respondent is purely fictional and non-est in the eyes of

law. This restrictive interpretation of "realisation" defeats the purpose of

incentivising Liquidators to operate the CD efficiently and maximise value.

Appellant also claims that the basis for dismissal of the Appellant's claim in

the Impugned Order dated 04.03.2025 namely, that the operational costs

exceeded the realisations and therefore no fee is payable, was neither a

ground raised by the Respondents in the earlier round before the AA nor

argued before the NCLAT in the prior Appeal.

36. The respondent which is the present liquidator claims that herein

Liquidator fee was not decided by COC, therefore, the Appellant is entitled to

fee as a percentage of amount realised net of liquidation cost as per

Company Appeal (AT) (Insolvency) No. 566 of 2025 25 of 41 Regulation 4(3) and the Appellant shall be paid on realisation of entire assets

of the CD as per Section 53 (3) of the IBC. Appellant claims a fee of ₹ 111.11

lakhs presuming the CD is liquidated for ₹ 159.17 crores. However, as per

Respondent the said claim does not have any legal basis. The Appellant is

entitled to be paid as per the amount realised from the assets of the CD

during his period of acting as Liquidator. However, factually during the

tenure of Appellant only one asset being a Toyota car was sold and an amount

of ₹ 2,60,000/- was realised for the same. There is no provision in law for any

fee to be paid to a Liquidator for sales and realisation made during the period

of CD being run as a going concern, including current assets, if any. The

Code and the regulations only provide for fee to Liquidator pursuant to sale

and realisation of assets of CD, where the provision for sale of assets is

provided in Regulation 32 of IBBI (Liquidation Process) Regulations, 2016.

37. After re-hearing of the matter as per remand of this Appellate Tribunal

the Appellant was denied any remuneration for his tenure as Liquidator in

the impugned order passed by the AA [NCLT, Chandigarh (AA)] dated

04.03.2025 in IA No. 893/2020. The Adjudicating Authority, after noting the

definition of "liquidation cost" as per the Code and several amendments in

the Regulations relating to "liquidation cost" and also amendments relating

to Regulation 4 of the Liquidation Regulations for payment of "liquidators

fees" and also after noting the clarifications issued by IBBI, after the

judgement of Hon'b1e High Court of Bombay in case of Amit Gupta Vs.

Insolvency anal Bankruptcy Board of India & Anr. [Writ Petition (Lodging) No.

34701 of 2023, Judgement dt. 04.04.2024] came to the following conclusion:

Company Appeal (AT) (Insolvency) No. 566 of 2025 26 of 41 "...

21. In view of the above, we are of the considered view that the cost of purchase, direct, indirect and other costs need to be considered in working out the liquidation cost in the present matter. Accordingly, the liquidation cost in the present case works out as under:

Rs Amount paid towards total 98,24,35.228.63 purchases made Indirect expenses incurred by Mr. 20,46,30.993.35 Gupta Direct expenses incurred by Mr. 6,41.23,739.04 Gupta Liquidation cost as determined by 7,52,81,004.00 Audit Report (placed on record by IA 1323/2023) Total liquidation cost 1,32,64,70,965.02

22. Since the Sales realization as per the submission of both the Applicant and Respondent are significantly less than the liquidation cost, nothing remains as realization for which any fees can be paid in terms of Regulations 4 of the Liquidation Regulations.

23. As a sequel to the discussion above, we are of the considered view that the Applicants' claim for fees amounting to Rs,188,02,261/- is not tenable under Regulation 4 read with 2(1) (ea) of the Liquidation Regulations read with section 5(16) of the IBC.

24. As a result, the present IA is dismissed, however without any costs, and disposed of accordingly."

[Emphasis supplied]

38. We further note that the Appellant was appointed as Liquidator on

08.08.2018 and continued to hold office as the Liquidator up to 31.10.2019.

Company Appeal (AT) (Insolvency) No. 566 of 2025 27 of 41 During this period, the Appellant drew an amount of ₹ 31.09 lakhs as

remuneration for acting in the capacity of Liquidator of the CD, out of the

funds of the CD in liquidation, which was drawn out of the liquidation estate.

It is pertinent to mention here that no resolution was approved by the COC

in its meeting pertaining to the liquidation proceedings. However, the

Appellant continued to draw the same fee that he was charging in the

capacity of Resolution Professional without any authorisation from the COC.

IBBI had also issued show cause notice to the Appellant based on the findings

of an inspection conducted by Inspecting Authority in respect of the conduct

of the Appellant as Liquidator of the CD for drawing fee as Liquidator without

any approval from the COC in contraventions to Regulation 4(3) of IBBI

(Liquidation Process) Regulations, 2016, and various other provisions of the

Code. IBBI in its order on 21.04.2020 ordered that the Applicant must

deposit an amount of ₹ 31,09,000/- in the liquidation estate of the CD. The

IBBI also observed that the Applicant is at liberty to claim Liquidator fee in

accordance with the provisions of Regulation 4(3) of the IBBI (Liquidation

Process) Regulations, 2016. Moreover, this order has not been set aside by

any authority so it has attained finality.

39. Before proceeding further, we note the amendment with respect to

Regulation 2 for determination of liquidation cost, which was issued by IBBI

on 25.07.20191, with its comparison with un-amended version in a tabular

format, as below:

1

Substituted by Notification No. IBBI/2019-20/GN/REG047 dated 25th July, 2019 (w.e.f. 25-07- 2019).

Company Appeal (AT) (Insolvency) No. 566 of 2025 28 of 41 Regulation 2(1) (ea)1 for liquidation cost under Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Prior to 25.07.2019 Post amendment of 25.07.2019

Liquidation cost" under sub-section "Liquidation cost" under clause (16) of (16) of section 5 means- section 5 means-

(a) fee payable to the liquidator under (i) fee payable to the liquidator under regulation 4; regulation 4;

(b) remuneration payable by the (ii) remuneration payable by the liquidator under regulation 7; liquidator under sub-regulation (1) of

(c) cost incurred by the liquidator regulation 7:

under regulation 24, and (iii) costs incurred by the liquidator

(d) interest on interim finance for a under sub-regulation (2) of regulation period of twelve months or for the 24;

period from the liquidation (iv) costs incurred by the liquidator for commencement date till repayment of preserving and protecting the assets, interim finance, whichever is lower 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 repayable¹[***] under sub-regulation (3) of regulation 2A;

(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, 2013 (18 of 2013), if any, shall not form part of liquidation cost.

Comparative picture reveals that the above amendment expanded the

items of cost to be considered for determination of Liquidators fees. Before

amendment dated 25th July, 20191 in the Liquidation Regulations, the

liquidation cost under Regulation 2(1)(ea) had four components. IBBI issued

another Circular on 28.09.20232 only to clarify the position, on the four new

components of liquidation cost, which are discussed hereinafter.

Company Appeal (AT) (Insolvency) No. 566 of 2025 29 of 41

40. It is also to be noted that vide the same notification of 25.07.20191, IBBI

modified the Regulation 4 with respect to liquidator's fees, which is noted as

below with both amended and amended version in a tabular form:

Regulation 4 for liquidator's fees1 under Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Prior to 25th July, 2019 Post 25th July, 2019

4. Liquidator's fee. 4. Liquidator's fee.

(1) The fee payable to the liquidator (1) The fee payable to the liquidator shall form part of the liquidation cost. shall be in accordance with the (2) The liquidator shall be entitled to decision taken by the committee of such fee and in such manner as has creditors under regulation 39D of the been decided by the committee of Insolvency and Bankruptcy Board of creditors before a liquidation order is India (Insolvency Resolution Process passed under sections 33(1)(a) or 33(2). for Corporate Persons) Regulations, (3) In all cases other than those covered 2016.

under sub-regulation (2), the liquidator 2 [(1A) Where no fee has been fixed shall be entitled to a fee as a percentage under sub-regulation (1), the of the amount realized net of other consultation committee may fix the fee liquidation costs, and of the amount of the liquidator in its first meeting.] distributed, as under: (2) In cases other than those covered under sub-regulation (1) 2[and (1A)], ..... the liquidator shall be entitled to a fee-

..... (a) at the same rate as the resolution professional was entitled to during the corporate insolvency resolution process, for the period of compromise or arrangement under section 230 of the Companies Act, 2013 (18 of 2013);

and

(b) as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation, as under:

.....

.....

3 [Clarification: For the purposes of clause (b), it is hereby clarified that where a liquidator realises any amount, but does not distribute the same, he shall be entitled to a fee corresponding to the amount realised by him. Where a liquidator distributes any amount, which is not realised by him, he shall be entitled to a fee corresponding to the amount distributed by him.]

(3) Where the fee is payable under clause (b) of sub-regulation (2), the liquidator shall be entitled to receive half of the fee payable on realisation

2 Inserted by Notification No. IBBI/2022-23/GN/REG094, dated 16th September, 2022 (w.e.f. 16-09-2022). 3

Inserted by Notification No. IBBI/2020-21/GN/REG062 dated 5th August, 2020 (w.e.f. 05-08-2020).

Company Appeal (AT) (Insolvency) No. 566 of 2025 30 of 41 only after such realised amount is distributed.

Clarification: Regulation 4 of these regulations, as it stood before the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 shall continue to be applicable in relation to the liquidation processes already commenced before the coming into force of the said amendment Regulations.]

It is to be noted that both in amended as well as unamended provisions the

fees payable to the Liquidator shall be as a percentage of the amount realised

net of other liquidation costs, and of the amount distributed, for the balance

period of liquidation. For further clarification with respect to "other liquidation

cost" as noted in Regulation 4(2)(b), IBBI issued another circular on

28.09.20234, the relevant extract of which are noted as below, which provides

detailed clarification for determination of Liquidators fees, as extracted below:

"The term "Amount of Realisation (exclusive of liquidation costs)" given in the table in Regulation 4(2)(b) mandates that all liquidation costs are to be deducted from the realisation amount. However, as per regulation 4(2)(b), "other liquidation cost" is to be deducted from realisation. There is a gap in understanding in the market about what components of the liquidation cost are to be excluded from the liquidation cost to derive "other liquidation cost".

The term "Amount of Realisation (exclusive of liquidation costs)" given in the table in Regulation 4(2)(b) mandates that all liquidation costs are to be deducted from the

4 Clarification w.r.t. Liquidators' fee under clause (b) of sub-regulation (2) of Regulation 4 of IBBI (Liquidation Process) Regulations, 2016 dated 28.09.2023.

Company Appeal (AT) (Insolvency) No. 566 of 2025 31 of 41 realisation amount. However, as per regulation 4(2)(b), "other liquidation cost" is to be deducted from realisation. There is a gap in understanding in the market about what components of the liquidation cost are to be excluded from the liquidation cost to derive "other liquidation cost". XXX In few cases, liquidators are only considering process cost as "other liquidation cost" and thereby, exclude the cost incurred in preserving and protecting the assets of the CD, and running the CD as a going concern to calculate "other liquidation cost". Before amendment dated 25th July, 2019 to the Liquidation Regulations, the liquidation cost under Regulation 2(1)(ea) had four components. To clarify the liquidation cost, through aforesaid amendment four new components of liquidation cost were added. In some cases, it is being wrongly interpreted that these newly added four components, inter-alia, such as going concern costs etc., are to not be considered as the liquidation cost in respect of all those cases where the liquidation process commenced before the aforesaid amendment. Since these four components are paid in priority to payment to stakeholders as per section 53 of the Code by virtue of it being liquidation cost under section 53(1)(a), these newly added components were always part of the liquidation cost irrespective of the date of commencement of liquidation process. Any other interpretation would create uncertainty about the priority of payment of these components of liquidation cost over payment to stakeholders.

Furthermore, the term "other liquidation cost" existed right from the inception of liquidation regulations and thus could not have meant to exclude certain components of

Company Appeal (AT) (Insolvency) No. 566 of 2025 32 of 41 liquidation costs from "liquidation costs" which were added by a subsequent amendment in 2019.

Clarification: The "other liquidation cost" in regulation 4(2)(b) shall mean liquidation cost paid in priority under section 53(1)(a), after excluding the liquidator's fee."

[Emphasis supplied]

41. On the contrary, the Appellant has tried to argue that it is incorrect to

hold that the entire operational expenses incurred during the going concern

period (eg, purchase of raw materials, salaries, utilities, etc) constitute

"liquidation costs" under Regulation 2(1)(ea), without offsetting the

substantial sales revenue generated during that period. It claims that the true

cost of keeping the CD as a going concern is the net operational loss, ie,

operational costs minus sales revenue, not the gross expenses alone. It also

claims that by including the gross expenditure without adjusting for income

grossly inflates the liquidation cost and misrepresents the actual economic

burden on the estate. We don't find any ambiguity in the above clarifications

in the IBBI circular that, since these four new components are paid in priority

to payment to stakeholders as per Section 53 of the Code by virtue of it being

liquidation cost under Section 53(1)(a), these newly added components were

always part of the liquidation cost irrespective of the date of commencement

of liquidation process.

42. In the light of above clarification issued by IBBI on 28.09.2023 the issue

is settled with respect to the cost being incurred to keep the CD as a going

concern during liquidation process. As a result, we don't agree with the

Company Appeal (AT) (Insolvency) No. 566 of 2025 33 of 41 arguments presented by the Appellant and go along with the arguments of the

present Liquidator-Respondent on this count. Basis clarifications noted above

we agree with the Respondent that the term "other liquidation cost" could not

have meant to exclude certain components of liquidation costs from

"liquidation costs" which were added by a subsequent amendment in 20191.

43. The Appellant has relied upon the decision of Hon'ble Supreme Court

reported as (1987) 3 SCC - PD Aggarwal and Ors vs State of UP and Ors,

wherein it was observed that there is no cavil with the proposition that the

government has the power to make and amend rules giving retrospective

effect. Nevertheless, such retrospective amendments cannot take away the

vested rights, which have accrued, and the amendments must be reasonable

and conform to the provisions of the Constitution. The Appellant claims that

he is, therefore entitled to have his fee determined in accordance with

Regulation 4(3), based on realisations and liquidation cost as understood

prior to 25.07.2019. This judgment is of no avail to the Appellant as we had

noted earlier that there was no ambiguity in the above clarifications in the

IBBI circular that since these four components are paid in priority to payment

to stakeholders as per Section 53 of the Code by virtue of it being liquidation

cost under Section 53(1)(a), these newly added components were always part

of the liquidation cost irrespective of the date of commencement of liquidation

process.

44. Now we proceed to go into the meaning of "amount realized" as per Code

and Regulations and test it to find whether it has to be seen in broader sense

Company Appeal (AT) (Insolvency) No. 566 of 2025 34 of 41 and not limiting to sales realisation of only fixed assets. From the materials

placed on record, we find that the Corporate Debtor had ceased operations on

31.03.2019, and all recoveries and turnover relied upon by the Appellant for

claiming Liquidator's fees, occurred prior to the amendment dated

25.07.2019. The Appellant contends that rights had already crystallised

under the unamended regime, which was preserved for ongoing liquidation

processes as per the clarification in the 2019 amendment itself. Appellant

claims that during the liquidation period from 08.08.2018 to 31.10.2019, the

Appellant oversaw business operations that generated a turnover of

approximately ₹ 278.47 crores and effected recoveries from various

government authorities, including over ₹ 81 crores in GST refunds and ₹ 28

crores in insurance claims. These sums were duly included in the liquidation

estate and reported in progress reports. The Appellant had sought

determination of his fee under Regulation 4(3), which permitted computation

on the basis of realisations net of liquidation costs. Alternatively, the

Appellant had sought to lay down an equitable and reasonable basis for

computation of remuneration and grant such other reliefs as may be just and

proper in the facts and circumstances of the case. The main contention of

Appellant before this Appellate Tribunal as well as NCLT has been that his

entitlement to fee cannot be based only on the sale of Asset (car which was

sold for ₹ 2,60,000/-), but should also include realizations from the sale of

goods during the period the Corporate Debtor was being run as a going

concern. Appellant has also stated that he has affected the sales of goods

amounting to ₹ 78,47,31,773/- during the Corporate Debtor being run as a

Company Appeal (AT) (Insolvency) No. 566 of 2025 35 of 41 going concern, upon which he is entitled to fee as a percentage, as provided

in Regulation 4(3). To support his contention, the Appellant also relied upon

the Circular dated 28.09.20234 issued by IBBI, and strongly relied upon

Clause 2.1 of the said Circular, where the phrase 'amount realised' was

explained in the said IBBI Circular.

45. It was brought to our notice that the Division Bench of Hon'b1e High

Court of Bombay in Amit Gupta Vs. Insolvency anal Bankruptcy Board of

India & Anr. [Writ Petition (Lodging) No. 34701 of 2023, Judgement dt.

04.04.2024] had struck down Clause 2.1 and Clause 2.5 of the IBBI Circular

dated 28.09.2023 as being ultra vires the IBBI (Liquidation Process)

Regulations, 2016, and the IBC, 2016, which has been relied heavily by the

Appellant. Thereafter, IBBI vide their circular dated 18.04.2024, has also

partially modified their earlier circular dated 28.09.2023 and has withdrawn

para 2.1 and 2.5 of their original Circular dated 28.09.2023. Thereafter, the

very basis of the argument of the Appellant has been struck down. On that

basis only the AA has come to conclusion as in the impugned order that:

"22. Since the Sales realization as per the submission of both the Applicant and Respondent are significantly less than the liquidation cost, nothing remains as realization for which any fees can be paid in terms of Regulations 4 of the Liquidation Regulations.

23. As a sequel to the discussion above, we are of the considered view that the Applicants' claim for fees amounting to Rs,188,02,261/- is not tenable under Regulation 4 read with 2(1) (ea) of the Liquidation Regulations read with section 5(16) of the IBC."

[Emphasis supplied]

Company Appeal (AT) (Insolvency) No. 566 of 2025 36 of 41

46. The Appellant relies on KL Tripathi vs State Bank of India, AIR 1984

SC 273; Narinder Nath vs Union of India, (1996) 8 SCC 54 and claims

that the law is well settled that a court or tribunal, while exercising powers

post-remand, cannot travel beyond the confines of the remand order. The

Impugned Order, therefore, deserves to be set aside on this ground alone. In

this particular case the Order of this Appellate Tribunal dated 11.03.2024,

remanding the case to the Adjudicating Authority noted as follows:

"Thus, in view of the aforesaid facts and circumstances, the present appeal succeeds and the impugned order is hereby set aside whereby the application filed by the appellant bearing I.A. No. 893 of 2020 has been dismissed. The matter is remanded back to the Learned Tribunal which restoring the application I.A. No. 893 of 2020. The parties are directed to appear before the Tribunal on 20.03.2023. It is made clear that the appellant shall give a break- up of the sales that has been made during the period of liquidation i.e. within six months, next 6 months, next one year etc. and the Tribunal shall take into consideration the sales effected by the Liquidator in terms of Clause 2.1 of the circular dated 28.09.2023 and pass an appropriate order in accordance with law."

[Emphasis supplied]

Post the order of this Appellate Tribunal dated 11.03.2024, the Division Bench

of Hon'b1e High Court of Bombay in case of Amit Gupta (supra), in its

judgment dated 04.04.2024 struck down Clause 2.1 and Clause 2.5 of the

IBBI Circular dated 28.09.2023 as being ultra vires the IBBI (Liquidation

Process) Regulations, 2016, and the IBC, 2016. It is to be noted that clause

2.1 was as follows:

"2.1 Amount realised: Regulation 4(2)(b) provides that the fee shall be "as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation...."

"Amount realised" means an amount that is being realised from the sale of an asset where the asset changes form. Where the asset is already liquid such as cash and bank balance including term deposits, mutual funds, and quoted shares, there is no 'realisation', and funds are readily available

Company Appeal (AT) (Insolvency) No. 566 of 2025 37 of 41 for distribution. The amount realised, thus, implies the proceeds from the sale/realization from the liquidation of assets which are not liquid. Therefore, the liquidator is not entitled to a fee on realisation for these liquid assets and is entitled to a fee only on distribution.

Clarification: "Amount realised" shall mean amount realised from assets other than liquid assets such as cash and bank balance including term deposit, mutual fund, quoted share available on start of the process after exploring compromise and arrangement, if any."

Thereafter, IBBI vide their circular dated 18.04.2024, had partially modified

their earlier Circular dated 28.09.2023 and had withdrawn para 2.1 and 2.5

of their original Circular dated 28.09.2023. Appellant had relied very heavily

on clause 2.1 and once the limb of the argument goes, then the claim of the

ex-liquidator also cannot be sustained. The Adjudicating Authority looked

into these changed circumstances, while passing the Order dated 04.03.2025

and with which we also concur with and therefore we do not find any infirmity

in the orders of the AA, which had gone into the issue afresh basis new

developments.

47. Looking into the legal provisions for the payment of liquidators' fees we

find that Sections 34 (8) and (9) of the Code deal with the fees to be paid to

the Liquidator. Relevant portion of Section 34 of the Code is reproduced

herein as under:

"Section 34. Appointment of Liquidator and fee to be paid- ...

(8) An Insolvency Professional proposed to be appointed as a Liquidator shall charge such fee for the conduct of liquidation proceedings and in such proportion to the value of the liquidation estate assets, as may be specified by the Board.

(9) The fees for the conduct of the liquidation proceedings under sub-section (8) shall be paid to the Liquidator from the proceeds of the liquidation estate under Section 53."

Company Appeal (AT) (Insolvency) No. 566 of 2025 38 of 41

48. Further, when we look into the provisions of the Regulation which

governs the payment of Liquidator's fees, we note that remuneration can be

paid to Appellant only in terms of Regulation 4 (3) of the Insolvency and

Bankruptcy Board of India (Liquidation Process) Regulations, 2016, as

applicable to the Corporate Debtor, i.e., the unamended Regulation which

stood before the amendment on 25.07.2019, i.e.,

"Regulation 4. Liquidator's fee.

(1)The fee payable to the liquidator shall form part of the liquidation cost.

(2)The liquidator shall be entitled to such fee and in such manner as has been decided by the committee of creditors before a liquidation order is passed under sections 33(1)(a) or 33(2). (3)In all cases other than those covered under sub-regulation (2), the liquidator shall be entitled to a fee as a percentage of the amount realized net of other liquidation costs, and of the amount distributed, as under.

XXXX XXXX (4)The Liquidator shall be entitled to receive half of the fee payable on realization under sub- regulation (3) only after such realized amount is distributed."

[Emphasis supplied]

As per this provision, the set mechanism for determining the Liquidator's fee

is that firstly, the Liquidator's fee shall be decided by the COC. Secondly, in

cases where the fee of the Liquidator has not been decided by the COC, the

Liquidator should draw the fee in accordance with Regulation 4 of IBBI

(Liquidation Process) Regulations, 2016, which deals with the Liquidator's

fee as noted above. In the present case, where Liquidator fee was not decided

by COC, the Applicant was entitled to fee as a percentage of amount realised

net of liquidation cost as per Regulation 4 of IBBI (Liquidation Process)

Company Appeal (AT) (Insolvency) No. 566 of 2025 39 of 41 Regulations, 2016. And the Applicant shall be paid on realisation of entire

assets of the CD as per Section 53 (3) of the IBC.

49. Without going into the details of calculations for determining fees "as a

percentage of amount realized net of other liquidation costs" as

provided in Regulation 4, we note that in any of the situations, nothing is

payable to the Liquidator basis total amount realized, taken at the maximum

and gross costs incurred. This has been noted by the AA as noted by us earlier

and we don't find any infirmity in this finding.

50. The Appellant had sought determination of his fee under Regulation

4(3), which permitted computation on the basis of realisations net of

liquidation costs. In the facts and circumstances of the case, we find that the

Sales realization of ₹ 78.47 crs are significantly less than the liquidation cost

of ₹132 crs, and nothing remains as realization for which any fees can be

paid in terms of Regulations 4 of the Liquidation Regulations. Therefore, we

find that the Applicants' claim for fees amounting to Rs,188,02,261/- is not

tenable under Regulation 4 read with 2(1) (ea) of the Liquidation Regulations

read with section 5(16) of the IBC and we don't find any infirmity of order of

the Adjudicating Authority.

51. In the present case, where Liquidator fee was not decided by COC, the

Appellant was entitled to fee as a percentage of amount realised net of

liquidation cost as per Regulation 4 of IBBI (Liquidation Process) Regulations,

2016, which is found to be not payable. The alternative prayer of the

Company Appeal (AT) (Insolvency) No. 566 of 2025 40 of 41 appellant that a fair and reasonable basis may be laid for computing the

Appellant's fees for the services rendered, which may be identical with the

fees paid to the Appellant and his team during CIRP Is not tenable, in the

light of the facts and legal provisions, as has been discussed herein earlier.

Orders:

52. We therefore conclude that nothing is found payable to the Liquidator

as Liquidator's fees. Appeal is dismissed. No orders as to costs.

[Justice Ashok Bhushan] Chairperson

[Arun Baroka] Member (Technical) New Delhi.

May 30, 2025.

pks

Company Appeal (AT) (Insolvency) No. 566 of 2025 41 of 41