Pranav B Prem

The National Company Law Tribunal (NCLT) at Kolkata has held that expenses incurred by a liquidator while exploring a scheme of compromise or arrangement under Section 230 of the Companies Act cannot be treated as liquidation cost, and therefore cannot be recovered from stakeholders or scheme proponents. The Tribunal reiterated that the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 draw a strict distinction between “liquidation cost” and the “liquidator’s fee”, and that the two cannot be merged or confused.

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A Bench comprising Judicial Member Bidisha Banerjee and Technical Member Siddharth Mishra delivered the ruling on 9 December 2025 while dismissing an application filed by Anil Goel, the liquidator of Varrsana Ispat Limited. Goel had sought recovery of ₹1.87 crore, of which ₹1.84 crore represented the liquidator’s fee claimed against efforts undertaken for a compromise scheme that was ultimately rejected by the Tribunal.

The liquidator argued that the amounts incurred between August 6, 2019 and August 13, 2021, while the Section 230 proposal was under consideration, fell within the meaning of “costs” under Regulation 2B(3) of the Liquidation Regulations. He submitted that since the scheme was not approved, the promoter — Akshay Jhunjhunwala, the suspended director — ought to bear such costs, as the liquidation estate should not have to expend funds on a proposal that yielded no results.

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Jhunjhunwala opposed the application, contending that Regulation 2B deals only with ‘cost’, not the liquidator’s fee, which is exclusively governed by Regulation 4. He pointed out that the liquidator had already drawn his statutory remuneration from the liquidation estate and was now attempting to recover an additional amount for the same period, which would amount to prohibited “double realisation”. He further argued that the scheme proponent cannot be saddled with the liquidator’s fee merely because the compromise proposal did not materialise.

The Tribunal agreed. It held that the definition of “liquidation cost” under Regulation 2(1)(ea) is exhaustive, and the proviso expressly excludes any expenditure relating to a Section 230 scheme. This statutory exclusion, the Bench said, “is categorical and admits no exceptions.” The NCLT clarified that Section 230-related expenses do not become liquidation cost unless the compromise or arrangement is finally sanctioned, in which case only the “cost” may be recovered — not the liquidator’s fee.

Further, the Bench noted that the liquidator had already received his remuneration from the liquidation estate as mandated under Regulation 4. Any attempt to claim an additional fee for the same work “would amount to double recovery”, which the Regulations prohibit.

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The Tribunal also relied on the NCLAT judgment in C.A. Jai Narayan Gupta v. Radhasiriya Properties Pvt. Ltd. (2023), which held that a proposer of a Section 230 scheme cannot be liable to bear the liquidator’s fee when the scheme is rejected. The appellate tribunal had clarified that liabilities arise only when a scheme is approved and implemented. Concluding that the claim was wholly unsustainable under the Liquidation Regulations, the NCLT dismissed the liquidator’s application in its entirety. The ruling settles the legal position that liquidators cannot classify Section 230-related expenses as liquidation cost, nor can they recover such expenses — including their fee — merely because a compromise proposal fails.

Appearance

For Liquidator: Advocates Rohit Sharma, Niraj Chamyel, Harsh Gupta, Aishwarya Prasad, Devesh Kr. Bhutra

For Respondent in IA 872, 2383, Respondent No. 3 in IA 1333: Advocates Shaunak Mitra, Dripto Majumdar, Saubhik Chowdhury, Sayantani Banerjee

For Respondent No. 4 in IA 1333 of 2017: Advocate Rishav Banerjee, PP. Bishwal, Sohini Dey

Cause Title: Anil Goel vs Akshay Jhunjhunwala

Case No: IA (IBC) No. 872/KB/2022 & IA (IBC) No. 2383/KB/2024 in CP (IB) No. 543/KB/2017

Coram: Judicial Member Bidisha Banerjee, Technical Member Siddharth Mishra