Appointment & Remuneration of Liquidator
Appointment & Remuneration of Liquidator under Sec. 34 of IBC
I. Appointment of liquidator and fee to be paid[Sec. 34]
1. Appointment [Sec. 34(1)]
Where the Adjudicating Authority passes an order for liquidation of the corporate debtor under section 33, the resolution professional appointed for the CIRP under Chapter II shall, subject to submission of a written consent by the resolution professional to the Adjudicatory Authority in specified form, act as the liquidator for the purposes of liquidation unless replaced by the Adjudicating Authority.
2. Replacement [Sec. 34(4)-(7)]
The Adjudicating Authority shall by order replace the resolution professional, if—
(a) the resolution plan submitted by the resolution professional under section 30 was rejected for failure to meet the requirements mentioned in sub-section (2) of section 30; or
(b) the Board recommends the replacement of a resolution professional to the Adjudicating Authority for reasons to be recorded in writing; or
(c) the resolution professional fails to submit written consent.
For the purposes of clause (a) and (c), the Adjudicating Authority may direct the Board to propose the name of another insolvency professional to be appointed as a liquidator. The Board shall propose the name of another insolvency professional along with written consent from the insolvency professional in the specified form within 10 days of the direction issued by the Adjudicating Authority. The Adjudicating Authority shall, on receipt of the proposal of the Board for the appointment of an insolvency professional as liquidator, by an order appoint such insolvency professional as the liquidator.
3. Eligibility for appointment as liquidator[LP Reg.-3]
- An insolvency professional shall be eligible to be appointed as a liquidator if he, and every partner or director of the insolvency professional entity of which he is a partner or director, is independent of the corporate debtor.
- A person shall be considered independent of the corporate debtor, if he-
(a) is eligible to be appointed as an independent director on the board of the corporate debtor under section 149 of the Companies Act, 2013, where the corporate debtor is a company;
(b) is not a related party of the corporate debtor; or
(c) has not been an employee or proprietor or a partner:
(i) of a firm of auditors or secretarial auditors or cost auditors of the corporate debtor; or
(ii) of a legal or a consulting firm, that has or had any transaction with the corporate debtor contributing ten per cent or more of the gross turnover of such firm,
in the last three financial years.
- A liquidator shall disclose the existence of any pecuniary or personal relationship with the concerned corporate debtor or any of its stakeholders as soon as he becomes aware of it, to the Board and the Adjudicating Authority.
- An insolvency professional shall not continue as a liquidator if the insolvency professional entity of which he is a director or partner, or any other partner or director of such insolvency professional entity represents any other stakeholder in the same liquidation process.
II. Liquidator’s Fee [Sec. 34(8) & (9)]
- An insolvency professional proposed to be appointed as a liquidator shall charge such fee for the conduct of the liquidation proceedings and in such proportion to the value of the liquidation estate assets, as may be specified by the Board.
- The fees for the conduct of the liquidation proceedings shall be paid to the liquidator from the proceeds of the liquidation estate under section 53.
- The fee payable to the liquidator shall be in accordance with the decision taken by the committee of creditors under regulation 39D of the CIRP Regulations, 2016. In cases other than those covered under CIRP Regulation 39D, the liquidator shall be entitled to a fee-
(a) at the same rate as the resolution professional was entitled to during the CIRP, for the period of compromise or arrangement under section 230 of the Companies Act, 2013; and
(b) as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation, as under:
|Amount of Realisation / Distribution (In rupees)||Percentage of fee on the amount realized / distributed|
|in the first six months||in the next six months||thereafter|
|Amount of Realisation (exclusive of liquidation costs)|
|On the first 1 crore||5.00||3.75||1.88|
|On the next 9 crore||3.75||2.80||1.41|
|On the next 40 crore||2.50||1.88||0.94|
|On the next 50 crore||1.25||0.94||0.51|
|On further sums realized||0.25||0.19||0.10|
|Amount Distributed to Stakeholders|
|On the first 1 crore||2.50||1.88||0.94|
|On the next 9 crore||1.88||1.40||0.71|
|On the next 40 crore||1.25||0.94||0.47|
|On the next 50 crore||0.63||0.48||0.25|
|On further sums distributed||0.13||0.10||0.05|
Note: Where the fee is payable as per above table, the liquidator shall be entitled to receive half of the fee payable on realisation only after such realised amount is distributed.
NCLAT in the matter of CoC M/s. Smartec Build Systems Pvt. Ltd. Vs. B. Santosh Babu & Ors. 10(IBC)10/2020 CoC is to pay the fees & cost incurred by IRP, who also acted during the resolution process beyond 30 days till the date of liquidation having not allowed to continue as Liquidator