Bhupesh Gupta vs Ravinder Kumar Goel Liquidator Supreme ...

IN THE MATTER OF: Bhupesh Gupta ...Appellant

Versus

Ravinder Kumar Goel ...Respondent Liquidator Supreme Tex Mart Ltd.

Present: For Appellant: Mr. Alok Jagga, Mr. Shubham Gupta, Ms. Aastha Agarwal, Advocates. For Respondent: Mr. Iswar Mohapatra, Advocate for R-1.

ORDER

(Hybrid mode)

Per: Justice Rakesh Kumar Jain (Oral)

11.03.2024: This appeal is directed against the order dated 28.09.2022

passed by Adjudicating Authority (National Company Law Tribunal,

Chandigarh Bench) by which an application bearing I.A. No. 893/2020 filed by

the appellant under Section 60 (5) (c) of Insolvency & Bankruptcy Code, 2016

(in short 'Code') read with Rule 11 of the NCLT Rules, 2016 has been

dismissed.

2. In brief, Allahabad Bank (Financial Creditor) filed an application under

Section 7 of the Code against M/s Supreme Tex Mart Ltd. (earlier known as

Supreme Rural Mills Pvt. Ltd.) (Corporate Debtor) for the resolution of its debt.

The application was admitted on 29.09.2017 and the appellant (Bhupesh

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Gupta) who was appointed as the Interim Resolution Professional (IRP) on

11.10.2017. The Corporate Debtor went into liquidation by order dated

08.08.2018 and the appellant was appointed as Liquidator to sell of the

Corporate Debtor as a going concern. On 01.11.2019 the appellant filed CA No.

941 of 2019 for relieving him from his duty on the medical ground. The said

application was allowed and Ravinder Kumar Goel was appointed as the

Liquidator.

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. It has also come on record that the appellant withdrew a sum of

Rs.31.09 lacs towards his fee for which he was served with the show cause

notice on 24.10.2019 by the IBBI. On 21.04.2020 the IBBI passed the order

that the Liquidator had wrongly withdrawn the fee of Rs. 31.09 and should

have rather proceeded in terms of Regulation 4 (3) of the IBBI (Liquidation

Process) Regulation, 2016 (in short 'the Regulations'). It is submitted by the

appellant that the amount of Rs.31.09 was deposited by the appellant with the

present Liquidator. However, the appellant had sought the review of the order

dated 21.04.2020 but the same was rejected as no power of review is vested

with the IBBI.

5. Be that as it may, the appellant submitted his claim on 15.07.2020 to

the present liquidator in terms of Regulation 4 of the Regulations for the

payment of fee for the realization of the assets of the Corporate Debtor. His

claim was rejected by the present Liquidator vide its order dated 27.08.2020 Company Appeal (AT) (Ins.) No. 1434 of 2022 3

while awarding fee only in regard to the asset (namely, a car) which was sold

for a sum of Rs.2,60,000/-. Aggrieved against the order dated 27.08.2020, the

appellant filed I.A. No. 893 of 2020 under Section 60 (5) of the Code before the

Tribunal. The said application has now been dismissed by the impugned order

dated 28.09.2022 and hence, the present appeal.

6. 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.

7. 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 laid emphasis on the word 'amount realized' to

contend that the appellant has not only sold the car for a sum of Rs.2,60,000/-

but also effected sales during Liquidation (within 6 months of Rs.

75,37,58,832/-, in the next six months of Rs. 30106506/- and in the next one

year 866435/-) which is a part of his claim made to the present liquidator

apart from other liquidation cost. It is submitted that the Tribunal has

committed a patent error in dismissing the application on the ground that the

appellant is entitled to the fee for the sale of car only without looking into the

fact that the appellant has made various sales of the goods of the Corporate

Debtor as a going concern. 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) (Ins.) No. 1434 of 2022 4

"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 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."

8. 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. It is submitted that the Tribunal

has erred in not appreciating the word 'amount realized' used by legislature in

Company Appeal (AT) (Ins.) No. 1434 of 2022 5

Regulation 4 (3) of the Regulations and has only taken into consideration the

sale of the tangible good i.e. the car though the appellant remained Liquidator

for a long period of one year and 84 days and in the interregnum sold various

assets belonging to the Corporate Debtor about which there is no objection

raised by the present Liquidator.

9. In reply, counsel for the respondent has submitted that the circular

dated 28.09.2023 issued by the IBBI is against the appellant because the

amount realized doesn't mean the assets which are already in liquid form.

10. 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.

11. 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

Company Appeal (AT) (Ins.) No. 1434 of 2022 6

the term "amount realized" has been further clarified which we have already

mentioned hereinbefore.

12. 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.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

sa/rr

Company Appeal (AT) (Ins.) No. 1434 of 2022