13 October, 2021
Matter: Mr. Jayesh N. Sanghrajka, Erstwhile R.P. of Ariisto Developers Pvt. Ltd v. The Monitoring Agency nominated by the Committee of Creditors of Ariisto Developers Pvt. Ltd.
Order dated: 23 September 2021
Summary: In the present case, the issue before the Principal Bench of the NCLAT was whether the Resolution Professional could charge success fee for CIRP. The NCLT, Mumbai Bench, while approving the resolution plan of the successful resolution applicant, disallowed the success fee of Indian Rupees Thirty Million to the Resolution Professional and directed redistribution of this amount. This order of the NCLT was appealed before the NCLAT by the Resolution Professional contending that the approval of success fee was a commercial decision of the CoC and the NCLT could not have interfered with the same while approving the resolution plan.
The NCLAT appointed an Amicus Curiae to assist the tribunal on whether 'success fees' could be charged. The Amicus Curiae submitted that the Code and related regulations contain no express provision for grant of success fees and that the Resolution Professional could charge remuneration only in a transparent manner and the same should be a reasonable reflection of the work and should not be inconsistent with the regulations. Also, there had to be a prior consultation of minds at initial stages of CIRP to see as to what a reasonable fee would be to be incurred on the Resolution Professional.
NCLAT opined that where the ‘success fees’ is more in the nature of contingency and speculative, it cannot be said to be a part of the provisions of the Code and the same is not chargeable. The NCLAT further found that the manner in which the ‘success fees’ was pushed for approval in the present case at the last minute when the CoC was approving the resolution plan, as well as quantum of the ‘success fees’ as improper, and upheld the decision of the NCLT rejecting the payment of ‘success fees’ to the Resolution Professional.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
