Mr. S. Gopalkrishnan vs Axis Bank Limited & Ors.

Per: MS. LAKSHMI GURUNG, MEMBER (J)

The above I.A. has been filed by Erstwhile Resolution Professional Mr. S. Gopalkrishnan (Applicant) under Section 60(5) of the Insolvency and Bankruptcy Code read with Regulation 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulation, 2016 for release of unpaid professional fees and expenses incurred by him towards Corporate Insolvency Resolution Process (CIRP) amounting to Rs.14,17,190.72.

An application was filed by an Operational Creditor against M/s Sixth Dimension Project Solution Ltd., (Corporate Debtor) under section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) which was admitted by this Adjudicating Authority vide order dated 09.10.2018 in C.P. NO. 587 (MB)/ 2018. Thus, CIRP of the Corporate Debtor commenced and Mr. S. Gopalkrishnan (Applicant) was appointed as the Insolvency Resolution Professional (‘IRP’) to discharge the functions under IBC.

After the public announcement, claims were received. Thereafter report certifying constitution of the Committee of Creditors (COC) along with the list of creditors was prepared and submitted on 06.11.2019 as per Regulation 17(1) and 13(2)(d) of IBBI (Insolvency Resolution Process for Corporate Person) Regulations.

An M.A. No 1626 of 2018 was filed on 19.12.2018 by the Committee of Creditors (‘CoC’) (Comprising of Axis Bank Limited) for the replacement of the Applicant and for appointment of Mr. Santanu T Ray as Resolution Professional. However, the Adjudicating Authority dismissed the said application vide order dated 13.03.2019 and confirmed the Applicant as RP. The relevant extract of the order has been reproduced as under:

Aggrieved by the above, Axis Bank Ltd. preferred an appeal before Hon’ble NCLAT challenging the impugned order dated 13.03.2019. The appeal was allowed vide order dated 16.08.2019 and Respondent No 4 was appointed as the Resolution Professional of the Corporate Debtor, in following terms:-

The Applicant had earlier filed an application bearing no MA 1984 of 2019 for Rs. 5,90,000/- to remit professional fees and expenses incurred of Rs. 7,48,415/- till 30.05.2019. The order for handing over the charge was passed after three months and the application has incurred costs and expenses till the time of actual handing over.

The R-4 informed the applicant that the member of COC in its 9^th Meeting vide email dated 21.05.2021 had ratified the following:

Accordingly, an amount of Rs. 6,85,463 was credited to the account of Applicant on 11.06.2021.

The Applicant submitted that he has performed duties and responsibilities from the date of his appointment till the date of handing over i.e. approx. ten months from 12.10.2018 to 16.08.2019 and is entitled to monthly remuneration @ Rs.1,18,000/- which comes to Rs. 11,99,667/- less already received Rs. 4,72,000/- thus leaving a balance of Rs. 7,27,667/-. In addition to professional fee above, the Applicant claims reimbursement of expenses incurred during the same period of Rs. 10,20,986.72/- out of which part amount of Rs. 3,31,463/- has been received leaving balance of Rs. 6,89,523/-.

It is the case of the Respondent that COC has paid a total amount of Rs. 6,85,462.72/- (Rupees Six Lakhs Eighty- Five Thousand Four Hundred Sixty -Two only) towards his claims (i.e. Rs. 3,54,000/- being professional fees + Rs. 331462/- for cost/ expenses) incurred as approved by COC and rest of the claims of the Applicant are in nature of reimbursement to the cost and expenses incurred to retain his appointment as RP which was challenged before NCLT and NCLAT. The Respondent Bank had challenged his appointment as an IRP and later as RP since the initial stage. It is duty of the COC to fix the expenses to be incurred by the Resolution Professional and the expenses should be directly related to the insolvency resolution process. However, in the present case, the remaining unpaid expenses are expenses to defend himself as an RP for his personal benefit and not for the Corporate Debtor.

Therefore, Respondent Bank is not liable to make payment of the cost and expenses incurred by the applicant in the proceedings initiated by the Respondent Bank for his replacement as RP before the Adjudicating Authority and the Appellate Authority.

Heard Ld. Counsel for the parties and perused the record.

The limited issue for adjudication is whether or not the Applicant is entitled to receive his professional fee for the entire period from the date of his appointment as IRP/RP i.e. 12.10.2018 till handing over of the charge by him to R-4, the new RP i.e. 16.08.2019 and the reimbursement of the expenses incurred by him during the said period, despite the fact that Committee of Creditors have not ratified the entire fee and expenses.

The Applicant has annexed a chart giving details of the amounts claimed with remarks which as follows:

There are no disputes raised by the Respondent as far as the facts given in above chart, is concerned. The primary contention by the Respondent is that the Respondent Bank had challenged his appointment as an IRP and later as RP since the initial stage and therefore the Applicant is not entitled to professional fee from 19.12.2018 onward when the Respondent Bank filed application before NCLT.

We note that COC has already approved and paid monthly remuneration @ Rs. 1,18,000/-. We refer to Circular No. IBBI/IP/013/2018 dated 12.06.2018 in which it is mentioned as follows:-

There is no dispute that the Applicant continued to discharge his duties and responsibilities as RP of the Corporate Debtor under IBC from his appointment (12.10.2018) till the date of handing over of the charge of the Corporate Debtor to R-4 (16.08.2019). During CIRP of CD, RP not only manages the CD as a going concern, but also protects the assets of the CD, convenes COC meetings etc, and takes care and responsibilities while discharging his duties as RP. Hence, he is entitled to the professional fee @ Rs. 1,18,000/- per month for the period from 12.10.2018 to 16.08.2019 amounting to Rs. 11,99,667/- less already received Rs. 4,72,000/- leaving a balance unpaid amount of Rs. 7,27,667.00.

We refer to Mr. Deveranjan Raman, Resolution Professional Poo Containers Pvt. Ltd. Vs. Bank of India Ltd. Vide its order dated 30.07.2020, wherein it was held that;

Insofar as out of pocket expenses are concerned the Applicant has claimed a total amount of Rs.10,20,986.72 out of which Rs. 3,31,463/-has already been paid to the Applicant. The Circular dated 12.06.2018 clearly states as follows:

We have carefully examined the nature of expenses claimed by the Applicant. It is noticed that the expenses after December 2018 (when Axis Bank constituting COC filed application before NCLT for replacement of IRP) are pertaining to expenses paid to Advocates, for legal services, appearances and other miscellaneous expenses connected with the legal proceedings for defending legal proceedings and not for the insolvency resolution process of the Corporate Debtor. We agree with the submission of the Respondent Bank CIRP cost would not include the personal expenses incurred by RP to defend himself (for his personal benefit and not for the Corporate Debtor). COC has already made the payment of Rs. 3,31,463.00/- to the Applicant which appears to be reasonable and the Applicant is not entitled for any further reimbursement.

Accordingly, the Applicant is entitled to receive professional fee only as discussed in para 14 above. Hence, Respondent COC is directed to release Rs. 7,27,667.00 to the Applicant towards his unpaid professional fee within one week.

The I.A. 2878/ 2021 in C.P. NO. 587 (MB)/ 2018 is partly allowed and stands disposed of in above terms.