The National Company Law Appellate Tribunal has clarified that an Interim Resolution Professional is not automatically entitled to full statutory fees during periods when the constitution of the Committee of Creditors is judicially stayed, even if limited verification duties continue. The ruling establishes that remuneration must be proportionate to actual functions discharged under restricted CIRP conditions.
Background & Facts
The Dispute
The dispute arises from the refusal of the Committee of Creditors (CoC) to pay full professional fees to CMA Harshad Deshpande, the Interim Resolution Professional (IRP), for the six-month period from 01.03.2023 to 31.08.2023, during which the constitution of the CoC was stayed by the NCLAT. The IRP contended that he performed substantial duties in verifying and collating creditor claims during this period and was therefore entitled to fees at the agreed rate of ₹2,50,000 per month or, at minimum, the statutory floor of ₹2,00,000 per month under Regulation 34B and Schedule II of the CIRP Regulations, 2016. The CoC, however, refused payment for this period, arguing that no substantive CIRP functions could be performed under the stay order.
Key Facts
- The Corporate Insolvency Resolution Process (CIRP) against M/s Shri Tradco Deesan Private Limited was initiated on 15.02.2023 under Section 7 of the Insolvency and Bankruptcy Code, 2016, with the Appellant appointed as IRP.
- On 28.02.2023, the NCLAT, in Company Appeal (AT) (Ins.) No. 244 of 2023, passed an interim order restraining the IRP from constituting the CoC and from undertaking any further CIRP steps except the collation and verification of claims.
- The stay remained in force until 01.09.2023, when it was vacated.
- During the stay period (01.03.2023 to 31.08.2023), the IRP received and verified claims from four financial creditors aggregating to ₹268.41 crores and nine operational creditors aggregating to ₹10.35 crores.
- The IRP issued multiple communications to creditors seeking documentation and clarifications, and filed updated lists of claims with the IBBI, with the last claim verified on 16.09.2023.
- The first CoC meeting was held on 18.09.2023, following the vacation of the stay, and resolved to replace the IRP with Shri Rakesh Kumar Relan as Resolution Professional.
- The second CoC meeting on 10.10.2023 approved the replacement, and the IRP handed over charge on 04.11.2023.
- The third CoC meeting on 30.11.2023 ratified fees as follows: ₹1,25,000 for 15.02.2023 - 28.02.2023; ₹2,00,000 for September 2023; ₹2,00,000 for October 2023; ₹26,666.67 for 01.11.2023 - 04.11.2023; totaling ₹5,51,667 (exclusive of GST). No payment was approved for the stay period.
- The IRP issued a legal notice on 27.03.2024 demanding full fees for the stay period.
- The IRP filed IA (IBC) No. 4549/2024 before the NCLT Mumbai on 05.04.2024 seeking payment.
Procedural History
- 15.02.2023: CIRP initiated; Appellant appointed as IRP.
- 28.02.2023: NCLAT stays constitution of CoC; permits only claim verification and collation.
- 01.09.2023: NCLAT vacates stay on CoC constitution.
- 18.09.2023: First CoC meeting; proposes replacement of IRP.
- 10.10.2023: Second CoC meeting; approves replacement of IRP.
- 26.10.2023: NCLT Mumbai appoints Shri Rakesh Kumar Relan as RP.
- 04.11.2023: IRP hands over charge to RP.
- 30.11.2023: Third CoC meeting ratifies partial fees; denies payment for 01.03.2023 - 31.08.2023.
- 27.03.2024: Legal notice issued by IRP demanding full fees.
- 05.04.2024: IA (IBC) No. 4549/2024 filed before NCLT Mumbai.
- 07.10.2024: NCLT Mumbai directs payment of ₹50,000 per month for the stay period (01.03.2023 - 31.08.2023) and reimbursement of verified expenses.
- 19.05.2026: NCLAT delivers judgment on appeal.
The Parties' Positions
Appellant (IRP): Argued that the stay only prohibited CoC constitution and not CIRP itself; claim verification was a statutory duty under Section 18(b) of the IBC; fees must be paid at the agreed ₹2,50,000/month or minimum ₹2,00,000/month under Regulation 34B.
Respondent No. 1 (RP): Stated no substantive claims were made against him; acted as a conduit for CoC decisions.
Respondent No. 2 (CoC): Contended that the stay rendered the CIRP substantially in abeyance; only limited functions were performed; no statutory entitlement to full fees arose; the ₹50,000/month granted by NCLT was already an equitable concession.
Relief Sought
The Appellant sought:
- Setting aside of the NCLT’s order dated 07.10.2024.
- Payment of professional fees at ₹2,50,000 per month for the period 01.03.2023 to 31.08.2023 (six months = ₹15,00,000).
- Alternatively, payment at the statutory minimum of ₹2,00,000 per month for the same period (₹12,00,000).
- Reimbursement of verified expenses.
- Interest on unpaid amounts.
The Legal Issue
The central question was whether an Interim Resolution Professional is entitled to the statutory minimum fee under Regulation 34B read with Schedule II of the CIRP Regulations during a period when the constitution of the Committee of Creditors is judicially stayed, and only limited claim verification duties are permitted, or whether remuneration must be proportionate to the actual scope of functions discharged.
Arguments Presented
For the Appellant
The Appellant relied on Regulation 34B and Schedule II of the CIRP Regulations, which mandate a minimum fee of ₹2,00,000 per month for admitted claims exceeding ₹50 crores. He argued that the NCLAT’s stay order did not suspend the CIRP but only restricted the constitution of the CoC. He performed statutory duties under Section 18(b) of the IBC by verifying and collating claims exceeding ₹250 crores, as acknowledged by the NCLT. He further contended that the CoC had initially agreed to ₹2,50,000 per month, and this agreement could not be unilaterally reduced. He distinguished IndusInd Bank Ltd. v. Rajendra K. Bhuta on grounds that the Supreme Court had imposed a complete stay in that case, whereas here, only a partial restriction applied.
For the Respondent
The Respondent CoC argued that the stay order effectively halted all substantive CIRP functions. While claim verification was permitted, the IRP could not perform core duties under Section 18(a), (c), (d), (e), (f), (g) or Section 20, including managing the corporate debtor as a going concern, appointing professionals, or raising finance. The CoC emphasized that fees under the IBC are contingent on actual discharge of duties and are not automatic. The ₹50,000 per month granted by the NCLT was already an equitable adjustment beyond legal obligation. The CoC further contended that the IndusInd Bank precedent applied by analogy, as the principle that no fees are payable during judicially stayed periods remains valid regardless of the scope of the stay.
The Court's Analysis
The NCLAT undertook a detailed examination of the statutory framework under Sections 18 and 20 of the Insolvency and Bankruptcy Code, 2016, to determine the nature of duties performed by the IRP during the stay period. The Tribunal noted that while Section 18(b) permits claim verification, the IRP’s other core obligations - including managing the corporate debtor as a going concern, constituting the CoC, monitoring assets, and raising interim finance - were entirely suspended.
"The IRP was permitted to take only the specific activity relating to collation and verification of claims. All further actions to be taken in the CIRP were stayed completely and the activities of the IRP stood drastically curtailed."
The Tribunal emphasized that the purpose of minimum fee provisions under Regulation 34B and Schedule II is to ensure reasonable compensation for the full range of statutory duties, not to create an automatic entitlement irrespective of operational reality. The Court observed that the IRP’s role during the stay was confined to administrative claim processing, without any managerial or operational authority.
"The purpose of prescribing minimum fees is to ensure reasonable professional compensation for functions performed during CIRP. Such provisions cannot be read to mean that the IRP becomes automatically entitled to full professional fees even during a period when the CIRP itself was functioning under substantial judicial restrictions and most statutory functions could not be undertaken."
The NCLAT found that the NCLT’s decision to award ₹50,000 per month was a balanced, equitable resolution that acknowledged the IRP’s limited work without granting full remuneration for functions that were legally prohibited. The Tribunal held that the CoC’s decision to reduce fees post-stay to ₹2,00,000 per month was commercially valid and aligned with Schedule II, and that the initial agreement of ₹2,50,000 per month was superseded by the changed circumstances of the stay.
The Court also affirmed that IndusInd Bank Ltd. v. Rajendra K. Bhuta was not distinguishable on material grounds, as the underlying principle - that fees are contingent on actual discharge of statutory functions - applies equally to partial stays. The Tribunal concluded that the IRP’s work during the stay, while real, was not equivalent to the full scope of duties expected in an unimpeded CIRP.
The Verdict
The appeal was dismissed. The NCLAT upheld the NCLT’s order dated 07.10.2024, directing payment of ₹50,000 per month for the period from 01.03.2023 to 31.08.2023 (six months = ₹3,00,000), along with reimbursement of verified expenses. The Appellant was not entitled to the statutory minimum of ₹2,00,000 per month or the agreed rate of ₹2,50,000 per month for the stay period. No interest was awarded. The CoC was directed to disburse the ₹3,00,000 within four weeks of the judgment.
What This Means For Similar Cases
Fees Are Proportional to Actual Function, Not Automatic
- Practitioners must now argue that IRP/RP remuneration during judicially restricted CIRP phases must reflect the actual scope of permitted duties, not statutory minimums.
- Claims for full fees during partial stays will be rejected unless the IRP can demonstrate discharge of multiple statutory functions under Sections 18 and 20.
CoC’s Commercial Judgment Is Presumed Valid Unless Arbitrary
- The CoC’s decision to reduce fees post-stay to the statutory minimum is not per se invalid, provided it aligns with the actual work performed.
- Agreed fee rates prior to a stay do not create binding obligations for subsequent periods under restricted conditions.
Documentation of Limited Work Is Critical
- IRPs must maintain detailed records of claim verification activities during restricted periods to substantiate claims for proportional remuneration.
- Failure to document communications, claim reviews, and IBBI filings may weaken claims for even minimal compensation.
Stay Orders Define the Scope of Entitlement
- Any judicial order restricting CIRP functions - even partially - triggers a re-evaluation of fee entitlement.
- Legal counsel must assess the precise language of stay orders to determine whether full, partial, or no fees are claimable.
The IndusInd Bank Principle Is Broadly Applicable
- The NCLAT extended the IndusInd Bank principle beyond complete stays to include partial restrictions that suspend core CIRP functions.
- Practitioners can no longer assume that any activity, however minor, justifies full statutory fees.
