In the recent judgment, the case CA Jai Narayan Gupta (Liquidator of Barcle Enterprises Limited) v/s Radhasiriya Properties Pvt. Ltd. in Company Appeal (AT) (Insolvency) No.1473 of 2023, the National Company Law Appellate Tribunal (NCLAT) recently clarified some of the complex issues surrounding liquidation fees, especially to agreements or compromises made during insolvency procedures.
The main issue at hand is the Scheme Proponent’s request for reimbursement of the Rs. 23,88,280 that they had previously paid to the Liquidator following the scheme’s rejection. It is necessary to study the terms of Section 34 of the Insolvency and Bankruptcy Code (IBC) and the related regulations to understand the NCLAT’s position. The right of the liquidator to fees from the liquidation estate is covered under Section 34 of the IBC. But the main point of argument in this case is when these fees should be applied, especially during the compromise time.
The NCLAT exhaustively studied Regulation 2B of the Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations, 2016, to arrive at its decision.
The interpretation of the regulatory framework is important to the NCLAT’s ruling. It made clear that although Section 34 gives the Liquidator the right to fees from the liquidation estate, this right does not apply during the compromise time. A key component of the judgment was Regulation 2B, which expressly covers the Liquidator’s costs during compromise or arrangement.
In the context of bankruptcy proceedings, the NCLAT emphasized the requirement of accurate legal interpretation and the distinction between expenses and liquidation fees. The tribunal noted that during the compromise period, the Liquidator is not entitled to fees as stipulated under Section 34. Rather, all payments or expenditures made at this stage are considered “costs,” and the Liquidator may invoice the Scheme Proponent for them.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/

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