State Bank Of India vs Skc Retails Ltd. Through Irp & Anr

For Appellant : Mr. P.V. Dinesh and Mr. Rajendra Beniwal, Advocates

For 2nd Respondent : Mr. Preet Pal Singh, Advocate

ORDER

06.03.2018 All these appeals have been preferred by the State Bank of

India (Financial Creditor), who is a member of the Committee of Creditors against 2

different orders passed by the Adjudicating Authority (National Company Law

Tribunal, Chennai.

2. Company Appeal Nos. 8 and 43 of 2018 arises out of two different orders

dated 26th October, 2017 and 14th November, 2017. By the first order dated 26th

October, 2017, the Committee of Creditors have been directed to bear the rest of

the expenses in proportion to the amount claimed by the Insolvency Resolution

Professional (IRP) and reads as follows:

"Counsel for Petitioner present. Ms. V. Santhiya,

representative of IRP present. It relates to the order that

has been passed on 12.07.2017 wherein the Corporate

Insolvency Resolution process was initiated against the

Corporate Debtor, moratorium was declared and the IRP

was appointed. The IRP has made the public

announcement and performed his duties. But the

expenses incurred for public announcement/other

expenses have not been paid by the Petitioner. Counsel

for the Petitioner submitted that to the extent of public

announcement the bill has already been received. The

said expenses shall be paid by the Petitioner to the IRP

on 10.11.2017. However, an issue has been raised by

the Counsel for the Petitioner that the CoC did not ratify

the other expenses to be paid to the IRP, rather the same

has been refused by the CoC, which reflects from the

Company Appeal (AT) (Insolvency) No. 08 & 43 AND 09 of 2018 3

Minutes of the first meeting of the CoC held on

05.10.2017.

In view of the above, we hereby direct the CoC to bear

the rest of the expenses in proportion to their amount

claimed within two weeks. The IRP shall take copy of

this order and deliver it to the Coc for compliance.

In terms of the above, the memo filed by the IRP stands

disposed of."

3. The Financial Creditors thereafter moved before the Adjudicating

Authority with regard to the said payment and by the impugned order dated 14th

November, 2017 the order of 26th October, 2017 was reiterated, which reads as

follows:

"Mr. V. Mahesh, IRP in person present. Counsel for

Applicant/Operational Creditor present. Counsel for

SBI/Financial Creditor present. The counsel for the

Financial Creditor has filed memo praying therein that

the Applicant/Operational Creditor moved Application

under section 9 of the IBC, 2016 despite knowing that no

securities are available as to pay fee to the IRP. Based

on this plea, the Financial Creditor prayed to recall the

order dated 26.10.2017. The plea made by the Financial

Creditor is devoid of merits for the reasons that even if

no securities are available, the IRP has to be paid. In that

Company Appeal (AT) (Insolvency) No. 08 & 43 AND 09 of 2018 4

event it is the duty of the CoC to make payment of the

remuneration in proportion to their total credit. The

Applicant/Operational Creditor has already paid

expenses for public announcement and he is also ready

to share the burden of the remuneration to the extent of

1/4th of the total. Therefore, in the circumstances, the

Applicant cannot be burdened for payment of whole of

the remuneration to the IRP. In view of this, we reiterate

the order dated 26.10.2017 and direct the members of

the CoC to pay the remuneration of the IRP within time

provided in the order dated 26.10.2017. Consequently,

the memo filed by the Financial Creditor stands

rejected."

4. In the other Company Appeal (AT) (Insolvency) No. 09 of 2018 almost

similar order dated 14th November, 2017 has been passed, which reads as

follows:

"Counsel for Petitioner present. Mr. V. Mahesh, IRP

present and Counsel representing SBI present. It relates

to the order that has been passed on 28.09.2017

wherein the corporate Insolvency Resolution process was

initiated against the corporate debtor, moratorium was

declared and the IRP was appointed. The IRP has made

the public announcement and performed his duties.

Company Appeal (AT) (Insolvency) No. 08 & 43 AND 09 of 2018 5

Counsel for the Petitioner submitted that the cost of public

announcement has been reimbursed by the operational

creditor who has initiated insolvency process. But other

expenses/ like the fees to the IRP has not been paid,

rather the same has been refused by the CoC, which

reflects form the minutes of the first meeting of the CoC

held on 12.10.2017. Perused the application filed by the

IRP for fixing the fee and for issuing necessary directions

to the CoC.

In view of the above and considering the prayer in the

application, I hereby direct the CoC to bear the fees of the

IRP in proportion to the amount claimed within 2 weeks.

The IRP shall deliver a copy of this order to the Coc for

compliance.

In terms of the above, the application filed by the IRP

stands disposed off."

5. The main plea taken by the appellant is that the Committee of Creditors

are not liable to bear any fees of the Insolvency Resolution Professional.

6. The question arises for consideration in this Appeal is whether the

Committee of Creditors are liable to bear the expenses incurred by the

Insolvency Resolution Professional or not.

Company Appeal (AT) (Insolvency) No. 08 & 43 AND 09 of 2018 6

7. Learned counsel appearing on behalf of the appellant reiterated the

argument that the Committee of Creditors are not liable to pay the expenses of

the Insolvency Resolution Professional.

8. Learned counsel appearing on behalf of the 2nd Respondent -IFFCO

TOKIO General Insurance Co. Ltd., another member of the Committee of

Creditors submitted that the expenses of Resolution Professional should be

borne by the Committee of Creditors and thereby supported the impugned

order(s).

9. Regulation 33 of the "Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Persons) Regulations, 2016" relates

to "cost of the interim resolution professional", 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 fixed 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" mean the fee to be paid to the interim resolution

Company Appeal (AT) (Insolvency) No. 08 & 43 AND 09 of 2018 7

professional and other expenses, including the cost of

engaging professional advisors, to be incurred by the

interim resolution professional."

10. As per Regulation 33, the applicant means the person who files the

application under Section 7 or 9 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as the "I&B Code") who generally proposes the name of

the 'interim resolution professional'. Such applicant negotiates the fee to be

charged and paid to the interim resolution professional. As per the provision

aforesaid, the Adjudicating Authority is required to fix the expenses where the

applicant has not fixed expenses under sub-regulation (1) of Regulation 33. In

such case, the applicant, who has filed the application under Section 7 or 9 of

the I & B Code, is required to bear the expenses which is to be reimbursed by

the committee of creditors to the extent the Committee of Creditors ratifies the

same.

11. In the present case, the application was filed by the respondent(s) under

Section 7 of the I & B Code, 2016 in Company Appeal (AT)(Insolvency) Nos. 08

& 43 of 2018 and under Section 9 of the I & B Code, 2016 in Company Appeal

(AT)(Insolvency) No. 09 of 2018. The name of resolution professional were

suggested by the applicant of such application. Therefore, as per sub-regulation

(1) of Regulation 33, the applicant is liable to incur the expenses of resolution

professional. Thereafter, the applicant will get the amount reimbursed by the

Committee of Creditors to the extent the amount as is ratified by the Committee.

Company Appeal (AT) (Insolvency) No. 08 & 43 AND 09 of 2018 8

The expenses will include all expenses as explained above in clause (4) of

Regulation 33.

12. The impugned orders dated 26th October, 2017 and 14th November, 2017

passed in Company Appeal Nos. 8 and 43 of 2018 and the order dated 14th

November, 2017 passed in Company Appeal No. 9 of 2018 stand modified to

the extent above. All the appeals are disposed of with the aforesaid

observations and directions. However, in the facts and circumstances of case

there shall be no order as to costs.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

/ns/uk

Company Appeal (AT) (Insolvency) No. 08 & 43 AND 09 of 2018