IBBI has jurisdiction to regulate the payment of IRP and RP: NCLAT

the NCLAT, main bench composed of Judge Ashok Bhushan, President and Vice President Singh, technical member in the case of Sumit Bansal, insolvency practitioner c. JP Engineers Creditors Committee argued that the IBBI is vested with jurisdiction to regulate the payment of PR and IRP compensation both by making regulations or issuing executive instructions until regulations are made to regulate the subject.

The Appellant was appointed as an Interim Resolution Professional (IRP) by the Contracting Authority. During the first meeting of the CoC, he claimed that he should receive a sum of Rs. 2 Lakhs per month, however, the CoC ratified the payment of only Rs. 50,000/- per month. The IRP was later replaced by the Resolution Professional.

Subsequently, the IRP filed a claim with a contracting authority demanding payment of fees at Rs. 2 Lakhs per month. The adjudication authority, against the contested order, ordered the IBBI to adjudicate the insolvency practitioner’s claim regarding its fees.

Against this order, the Appellant appealed on the grounds that the IBBI does not have jurisdiction to decide the question of the payment of the IRP’s fees and that the Arbitral Authority should not have sought the opinion of the IBBI regarding IRP fees. Appellant. The appellant argued that the contracting authority should have decided the question of fees itself.

The NCLAT relied on Article 240(1) of the Insolvency and Bankruptcy Codewhich empowers IBBI to establish regulations and rules consistent with the Code, to carry out the provisions of the Code.

As an extension of this provision, the IBBI has framed the Insolvency and Bankruptcy of India (Insolvency Practitioners) Regulations 2016under which, Regulation 7(2)(h) provides that the insolvency resolution practitioner must comply with the code of conduct specified in the first schedule to these regulations. In the first schedule, section 25 requires an insolvency practitioner to provide services for remuneration that is billed in a transparent manner, reasonably reflecting the work.

The NCLAT ruled on the appeal and ruled that –

“We are therefore of the view that the IBBI is fully vested with the jurisdiction to regulate the payment of PR and IRP remuneration both by framing regulation or issuing executive instructions until the regulation is not framed can regulate the matter, so it is our view that IBBI until the necessary regulations are not developed, the regulatory fee is empowered to issue executive instructions in this regard. payment of fees to the IRP/PR occurs very frequently and should be regulated by the regulatory authority which is vested with power.The mere fact that IBBI has been asked to submit its recommendations by the contracting authority, in the In this case, we see no reason to question IBBI’s competence to submit a recommendation.”

The Appeals Tribunal ordered the contracting authority to rule on the claim after receiving IBBI’s recommendations.

Counsel for the Appellant: Mr. Abhishek Garg, Mr. Ayush Kuchhal, lawyers

Counsel for the Respondent: PBA Srinivasan, Mr. Parth Tandon, PS Chandralekha, Ms. Nikitha Ross, Ms. Sneha Iyer, R1 Advocates. Mr. KD Sharma, attorney for R2.

Click here to read/download the order


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Elaine R. Knight