Can CoC Bypass the Mandatory Liquidator’s Fee under IBBI Regulation 21A? NCLT Ahmedabad Clarifies

Introduction

In the high-stakes arena of corporate insolvency, the statutory mandate of the IBC¹ acts as a sentinel, ensuring that even when secured creditors march outside the common pool to realize their dues, they do not trample upon the administrative framework that sustains the process. The focus of modern insolvency law has shifted from mere debt recovery to a structured, time-bound liquidation where the “user-pay” principle ensures that those who benefit from the legal ecosystem contribute to its maintenance. One of such critical issues is whether the CoC can bypass mandatory liquidator’s fee prescribed under the IBBI Regulation 21A² while realizing assets under the SARFAESI Act³.

This issue was addressed in the recent matter of Ramesh Kumar Totla (Liquidator of M/s Raghuvanshi Cotton Ginning and Pressing Pvt. Ltd) v. State Bank of India⁴, the NCLT Ahmedabad Bench⁵, presided over by Mr. Shammi Khan (Judicial Member) and Mr. Sanjeev Sharma (Technical Member) primarily held that the obligation to pay liquidation costs under Regulation 21A is absolute and independent of whether the assets were sold by the liquidator or the creditor.

The Corporate Debtor was ordered into liquidation and the Applicant was appointed as the Liquidator. The Respondent held a claim and elected not to relinquish its security interest, choosing instead to realize its sole asset, a factory land and building under the SARFAESI Act. Although the asset was successfully auctioned, the Respondent failed to remit the estimated liquidation costs and the liquidator’s fee within the statutory 90-day window, leading the Liquidator to approach the Tribunal for relief.

Regulatory Precedence: Overriding CoC Fee Fixation in Liquidation

The Applicant (Liquidator) contended that under Regulation 21A(2)(a), a secured creditor who realizes security interest must pay the liquidation costs, including the liquidator’s fee as per Schedule II of the Regulations. He argued that the fee fixed by the erstwhile CoC⁶ during the CIRP⁷ was not binding post-liquidation and that the Tribunal’s own liquidation order directed fees in proportion to the liquidation estate value.

Conversely, the Respondent contended that the Liquidator was attempting “personal enrichment” by claiming an exorbitant fee for a sale he did not conduct. They further argued that the CoC had already fixed a consolidated fee for the first six months under Regulation 39D, which was recorded in the liquidation order. The Respondent asserted that since the Liquidator performed no substantive work toward the SARFAESI sale, he was not entitled to a percentage-based fee on the realization.

The Tribunal analyzed the conflict between the CoC’s prior fee fixation and the statutory fee structure under the Liquidation Regulations. The Bench drew significant reliance on some legal precedents. The case of Small Industries Development Bank of India v. Shri Vijender Sharma⁸ reinforced that the 90-day period for payment of costs is a mandatory statutory milestone. The NCLAT in State Bank of India v. Navjit Singh⁹ emphasized that secured creditors cannot evade the “liquidation cost” umbrella by simply opting out of the relinquishment process. 

In the case of Shikshak Sahakari Bank Limited v. Mr. Jagdish Kumar Parulkar¹⁰ The NCLAT held that the liquidator’s fee is payable under Regulation 4 even when the secured creditor realizes assets independently, as the liquidator maintains the overall responsibility for the estate. “The liquidator is entitled for a fee under Regulation 4(2)(b) only when he has realised or distributed any amount is not tenable in the light of Regulation 21A… the Liquidator is taking care of the realisation of the assets through the secured financial creditor and for that reason, he must coordinate for all the activities.”

The NCLT removed the dichotomy by ruling that the Liquidation Regulations override the CoC’s prior decisions once the liquidation process commences. The Bench observed that Regulation 21A(2)(a) specifically requires the secured creditor to pay the liquidator’s fee and expenses within 90 days of the liquidation commencement. It noted that the Respondent could not unilaterally decide to pay only the CoC-approved fee when the liquidation order specifically directed fees “in proportion to the value of the liquidation estate.” Consequently, the Tribunal directed the Respondent to pay the balance liquidation costs and fees, affirming that the statutory framework for fee calculation (Schedule II) remains the default standard unless specifically modified by the Tribunal or a validly constituted SCC¹¹.

Conclusion

This case of Ramesh Kumar Totla (Supra) serves as a definitive clarification on the financial obligations of secured creditors who choose to stand outside the liquidation estate. By holding the Secured creditor accountable for the liquidator’s fees and expenses despite the bank conducting its own SARFAESI sale, the NCLT Ahmedabad Bench has reinforced the administrative integrity of the Insolvency and Bankruptcy Code. The ruling establishes that the “liquidation cost” is a statutory charge that ensures the liquidator’s office remains viable throughout the winding-up process.

This will likely discourage secured creditors from stalling the payment of liquidation costs under the guise of “verification” or prior CoC agreements. It strengthens the position of liquidators, ensuring they are compensated for the regulatory oversight they provide, even when they are not the primary sellers of the asset. This will lead to more predictable cash flows for insolvency professionals and faster closure of liquidation proceedings.

Will the IBBI introduce a specific “reduced fee scale” for cases where the liquidator’s role is purely oversight during a SARFAESI sale, and how will the “90-day rule” be interpreted if the asset sale is delayed due to litigation beyond the creditor’s control? This inquiry seeks to clarify fee structures for limited liquidator involvement and the flexibility of statutory timelines during legal disputes.

Expositor(s): Adv. Shreya Mishra

1. Insolvency and Bankruptcy Code, 2016 ↩︎
2. Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 ↩︎
3. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ↩︎
4. Ramesh Kumar Totla (Liquidator of M/s Raghuvanshi Cotton Ginning and Pressing Pvt. Ltd) v. State Bank of India C.P. (IB)/74 (AHM) 2024 ↩︎
5. National Company Law Tribunal, Ahmedabad Bench ↩︎
6. Committee of Creditors ↩︎
7. Corporate Insolvency Resolution Process ↩︎
8. Small Industries Development Bank of India v. Shri Vijender Sharma,Company Appeal (AT) (Insolvency) No. 1027 of 2021 ↩︎
9. State Bank of India v. Navjit Singh, Company Appeal (AT) (Insolvency) No. 461 of 2025 ↩︎
10. Shikshak Sahakari Bank Limited v. Mr. Jagdish Kumar Parulkar, Company Appeal (AT) (Insolvency) No. 461 of 2025 ↩︎
11. Stakeholders’ Consultation Committee ↩︎