IBC | Case Law Alert | Insolvency Professional's fees to be ratified by Committee of Creditors

Mar2018

Corporate & Commercial

In an important ruling by National Company Law Appellate Tribunal (“NCLAT”) in the case of State Bank of India vs SKC Retails Ltd. Through IRP & anr., dated 6 March 2018 (available here), it dealt with the issue whether the committee of creditors (“COC”) are liable to bear the expenses incurred by the insolvency resolution professional or not.

The NCLAT held that as per Regulation 33 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”):

the applicant means the person who files the application under Section 7 or 9 of the Insolvency and Bankruptcy Code, 2016 (“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.
the NCLT is required to fix the expenses where the applicant has not fixed expenses.
the applicant, who has filed the application, is required to bear the expenses which is to be reimbursed by the COC to the extent the COC ratifies the same.

Regulation 33 of the CIRP Regulations reads as:

“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 professional and other expenses, including the cost of engaging professional advisors, to be incurred by the interim resolution professional”

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