Liquidator Not Entitled To Additional Remuneration For Litigation-Related Delay: NCLT Kochi

The National Company Law Tribunal (NCLT) at Kochi has recently held that a liquidator cannot claim additional remuneration beyond the fee prescribed under the statutory framework merely because the liquidation process remained pending due to litigation.

The tribunal accordingly dismissed an application filed by the liquidator of Raihan Healthcare Private Limited.

A coram of Judicial Member Vinay Goel and Technical Member Ravichandran Ramasamy was hearing an application filed by the liquidator.

He sought additional remuneration for a 35.5-month period during which the liquidation process remained affected due to the COVID-19 pandemic, multiple litigations, and judicial stay orders.

"The Legislature, in its wisdom, has provided a structured mechanism for determining the Liquidator's remuneration with the object of ensuring that the liquidation process is completed in a time-bound manner while safeguarding the interests of all stakeholders at every stage. Therefore, any claim for additional remuneration beyond the fee already fixed under Regulation 4 is contrary to the statutory scheme and cannot be sustained.", the tribunal ruled.

The Liquidator contended that he continued to discharge his duties during the stay period without any remuneration for that period. He argued that despite repeated interruptions in the liquidation process, he maintained and revived the corporate debtor's multispecialty hospital during the pandemic. He also contended that the delays were entirely beyond his control.

Union Bank of India and another stakeholder opposed the application. They contended that the Liquidator had already received his remuneration in accordance with Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016 and was not entitled to any additional fee.

The tribunal noted that the liquidator had realized assets worth ₹39.72 crore. It noted that he had already been paid ₹55.21 lakh as remuneration. The Tribunal also observed that stakeholders had separately paid the liquidation costs, legal fees, and other incidental expenses incurred in defending various litigations.

It further noted that none of the precedents relied upon by either side directly addressed the issue of whether a liquidator, after receiving remuneration under the statutory framework, could claim additional remuneration merely because the liquidation proceedings remained pending due to judicial proceedings and interim orders.

"The delay in proceeding with the liquidation process on account of ongoing litigations and interim protection, if any, or extraordinary circumstances that arose due to the COVID-19 pandemic cannot, by itself, be attributed to any omission or negligence on the part of the Liquidator, but simultaneously, such circumstances do not automatically confer a legal right to claim enhancement of remuneration beyond the statutory scheme.", the trubunal observed.

The tribunal further held that once the Stakeholders' Consultation Committee had fixed the Liquidator's remuneration under Regulation 4 and the liquidator had accepted and received the fee, he was estopped from claiming any additional remuneration outside the framework of Regulation 4.

Rejecting the Liquidator's alternative plea to exclude the 35.5-month litigation period while computing his remuneration, the tribunal observed:

"If we allow the exclusion of such periods, practically, the Resolution Professionals/Liquidators would cease to show interest in such litigations. In other words, such an interpretation would dilute the incentive for expeditious completion of the liquidation process and could discourage timely pursuit and disposal of pending proceedings affecting liquidation."

The tribunal further observed that granting the relief sought would amount to judicially modifying the statutory mechanism governing the liquidator's remuneration. It added that such a course would unnecessarily burden the liquidation estate and ultimately reduce the assets available for distribution among stakeholders.

Accordingly, the tribunal dismissed the application.

For Applicant: Advocate A.G Sathyanarayana

For Respondents: Advocates Varun Srinivasan and Shinu J Pillai