Bhupesh Gupta vs Ravinder Kumar Goel

Per: Justice Rakesh Kumar Jain (Oral)

This appeal is directed against the order dated 28.09.2022 passed by Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench) by which an application bearing I.A. No. 893/2020 filed by the appellant under Section 60 (5) (c) of Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) read with Rule 11 of the NCLT Rules, 2016 has been dismissed.

In brief, Allahabad Bank (Financial Creditor) filed an application under Section 7 of the Code against M/s Supreme Tex Mart Ltd. (earlier known as Supreme Rural Mills Pvt. Ltd.) (Corporate Debtor) for the resolution of its debt. The application was admitted on 29.09.2017 and the appellant (Bhupesh Gupta) who was appointed as the Interim Resolution Professional (IRP) on 11.10.2017. The Corporate Debtor went into liquidation by order dated 08.08.2018 and the appellant was appointed as Liquidator to sell of the Corporate Debtor as a going concern. On 01.11.2019 the appellant filed CA No. 941 of 2019 for relieving him from his duty on the medical ground. The said application was allowed and Ravinder Kumar Goel was appointed as the Liquidator.

The appellant has thus worked as a Liquidator of the Corporate Debtor from 08.08.2018 to 01.11.2019 (for one year and 84 days).

It has also come on record that the appellant withdrew a sum of Rs.31.09 lacs towards his fee for which he was served with the show cause notice on 24.10.2019 by the IBBI. On 21.04.2020 the IBBI passed the order that the Liquidator had wrongly withdrawn the fee of Rs. 31.09 and should have rather proceeded in terms of Regulation 4 (3) of the IBBI (Liquidation Process) Regulation, 2016 (in short ‘the Regulations’). It is submitted by the appellant that the amount of Rs.31.09 was deposited by the appellant with the present Liquidator. However, the appellant had sought the review of the order dated 21.04.2020 but the same was rejected as no power of review is vested with the IBBI.

Be that as it may, the appellant submitted his claim on 15.07.2020 to the present liquidator in terms of Regulation 4 of the Regulations for the payment of fee for the realization of the assets of the Corporate Debtor. His claim was rejected by the present Liquidator vide its order dated 27.08.2020 while awarding fee only in regard to the asset (namely, a car) which was sold for a sum of Rs.2,60,000/-. Aggrieved against the order dated 27.08.2020, the appellant filed I.A. No. 893 of 2020 under Section 60 (5) of the Code before the Tribunal. The said application has now been dismissed by the impugned order dated 28.09.2022 and hence, the present appeal.

Counsel for the appellant has submitted that the case of the appellant is covered by the pre-amended Regulation 4 of the Regulations as his claim starts from 08.08.2018 and ends on 01.11.2019 whereas the amendment in Regulation 4 came into effect from 25.07.2019.

Counsel for the appellant has submitted that as per the un-amended provision of Regulation 4 (3), the Liquidator is entitled to a fee as a percentage of the amount realized, he has laid emphasis on the word ‘amount realized’ to contend that the appellant has not only sold the car for a sum of Rs.2,60,000/-but also effected sales during Liquidation (within 6 months of Rs. 75,37,58,832/-, in the next six months of Rs. 30106506/- and in the next one year 866435/-) which is a part of his claim made to the present liquidator apart from other liquidation cost. It is submitted that the Tribunal has committed a patent error in dismissing the application on the ground that the appellant is entitled to the fee for the sale of car only without looking into the fact that the appellant has made various sales of the goods of the Corporate Debtor as a going concern. He has also referred to a circular of the IBBI dated 28.09.2023 in which the word ‘amount realized’ has been explained/clarified. Clause 2.1 of the said circular read as under:

On the basis of the aforesaid, it is contended that it has now been clarified by the IBBI that ‘amount realized’ would mean the amount realized from the sale of the asset where the asset changes form. He has been candid enough to submit that where the asset is already liquid such as cash and bank balance including term deposits, mutual funds and quoted shares, then it would not be the realisation of the asset because it is already available for the purpose of distribution to the stakeholders. It is submitted that the Tribunal has erred in not appreciating the word ‘amount realized’ used by legislature in Regulation 4 (3) of the Regulations and has only taken into consideration the sale of the tangible good i.e. the car though the appellant remained Liquidator for a long period of one year and 84 days and in the interregnum sold various assets belonging to the Corporate Debtor about which there is no objection raised by the present Liquidator.

In reply, counsel for the respondent has submitted that the circular dated 28.09.2023 issued by the IBBI is against the appellant because the amount realized doesn’t mean the assets which are already in liquid form.

We have heard counsel for the parties and after perusal of the record are of the considered opinion that there is an error in the approach of the Tribunal while rejecting the application filed by the appellant which deserves to be reconsidered in terms of the order being passed herein. The issue in the present case is that the appellant effected various sales during the period he remained the liquidator of the Corporate Debtor which has been set up by the appellant in the claim application filed before the present Liquidator in which it is shown that total amount of sale is Rs. 78,47,31,778/- and the appellant is accordingly entitled to the percentage of fee in respect of the sales effected in the first six months, next 6 months, next one year and thereafter etc.

However, this aspect of the matter has not been taken into consideration either by the present Liquidator or by the Ld. Tribunal whereas it is very much clear not only from Regulation 4 (3) (unamended provision) that the amount realized is to be considered but also from Circular dated 28.09.2023 by which the term “amount realized” has been further clarified which we have already mentioned hereinbefore.

Thus in view of the aforesaid facts and circumstances, the present appeal succeeds and the impugned order is hereby set aside whereby the application filed by the appellant bearing I.A. No. 893 of 2020 has been dismissed. The matter is remanded back to the Learned Tribunal which restoring the application I.A. No. 893 of 2020. The parties are directed to appear before the Tribunal on 20.03.2023. It is made clear that the appellant shall give a break-up of the sales that has been made during the period of liquidation i.e. within six months, next 6 months, next one year etc. and the Tribunal shall take into consideration the sales effected by the Liquidator in terms of Clause 2.1 of the circular dated 28.09.2023 and pass an appropriate order in accordance with law.