NCLAT didn’t interfere with the impugned order directing the Financial Creditor to first pay fees of the Resolution Professional and then make recovery from the Corporate Debtor
ORDER
The Hon’ble National Company Law Appellate Tribunal (NCLAT) has, by way of its order dated November 14 2019, in the matter of Muthoot Finance Ltd (Appellant) vs Southern Investments Pvt. Ltd. & Ors (Respondents) in Company Appeal(AT) (Insolvency) No. 161 of 2019 did not find any error with the impugned order directing the Appellant to first pay and then make recovery from the Corporate Debtor and accordingly dismissed the appeal.
BRIEF FACTS
The following facts are noteworthy:
(a) The Resolution Professional (RP) filed a memo before the Hon’ble National Company Law Tribunal, Chennai Bench, Chennai (NCLT) wherein it was mentioned that two of the members of the Committee of Creditors (CoC)have not paid their share of remuneration to her. Muthoot Finance Limited (MFL) to pay Rs. 6,61,200/- and Hinduja Leyland Finance Limited has to pay Rs. 55,500/-.
(b) MFL submitted before the NCLT that during the corporate insolvency resolution process (CIRP), the Corporate Debtor (CD) has been benefited and the Hon’ble Supreme Court vide its order dated November 20, 2018 has directed that application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed before the NCLT shall stand dismissed.
c) Counsel for one of the members of the CoC submitted that in case any direction is being issued to MFL for making payment of Rs. 6,61,200/- to the RP. Then a direction may be given to the CD for making payment of Rs. 6,61,200/- to MFL as the Corporate Debtor is liable to pay the fees and other charges to the Resolution Professional.
d) The NCLT vide its order dated January 21, 2019 directed MFL to make payment of Rs. 6,61,200/- within two weeks, which shall be paid by the CD to MFL thereafter within three weeks’ time.
e) Against the NCLT order dated January 21, 2019, MFL filed an appeal before the NCLAT.
Submissions by MFL before NCLAT
f) In the said appeal, MFL contended that it was only a Financial Creditor, who filed claim and was part of CoC and liability to pay remuneration does not come from it. When CD is available, the CD should have been directed to pay the amount towards remuneration.
g) MFL also submitted that it was merely a member of CoC and in the present case has not benefitted anything but is saddled with the burden of payment and then recovery.
Submissions by RP before NCLAT
h) In response to above point (f), RP submitted that on April 25 2018, in the first meeting of CoC, the fee of the RP was fixed. He also referred to the reply affidavit for the procedure followed in such proceedings. It was stated that the CoC takes the decision with regard to fees to be paid to Interim Resolution Professional/Resolution Professional which initially CoC members contribute in proportion of their voting share and the same procedure was followed in the present matter. It was argued that other than the MFL, no other CoC member has raised any question regarding initial contribution towards fees and have paid their shares. The fee paid by the Financial Creditors is recoverable by the Financial Creditor from the Corporate Debtor. The fees of Interim Resolution Professional cannot be left in suspense and the IBC ensures priority to the payment of fees of Interim Resolution Professional/Resolution Professional.
i) In response to above point (g), RP submitted the record showing that various benefits have accrued to the MFL because of the CIRP where even agreements were entered letting the MFL retain some flats and the MFL cannot say that he has not been benefitted anything from the process.
HIGHLIGHTS OF THE ORDER
Some of the key highlights of the order are:
(a) The Hon’ble NCLAT mentioned under the order that we are not concerned whether the Appellant benefitted or not. Under Section 25(2)(c) of Insolvency and Bankruptcy Code, 2016, it is the duty of the Resolution Professional to take actions during CIRP to raise interim finances subject to the approval of the CoC under Section 28.
b) The Hon’ble NCLAT further added that when it is shown in the present matter that CoC has fixed fees and other members of CoC have contributed towards fees of the Resolution Professional in proportion of their voting shares, the Appellant cannot be heard saying that it will not contribute especially when the same is recoverable.
CONCLUSION
By this order, the Hon’ble NCLAT inter-alia didn’t interfere with the impugned order directing the Financial Creditor to first pay fees of the Resolution Professional and then make recovery from the Corporate Debtor.
Relevant Links:
1) NCLT order dated January 21, 2019 : https://nclt.gov.in/sites/default/files/Interim-order-pdf/ma%20637_0.pdf
2) NCLAT order dated November 14, 2019: https://nclat.nic.in/Useradmin/upload/11351111895dce8c6ce8ab5.pdf
Date: November 16, 2019
About the Author: The author (CS Lovkesh Batra) is Company Secretary by profession and works in the area of Insolvency & Bankruptcy Law.
Disclaimer: The entire contents of this document have been prepared on the basis of the information existing at the time of the preparation. The author does not take responsibility of the same and this document cannot used to be quoted before any authority under any law.
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