Which IBC section allows liquidator to charge creditors?

Hi Gunasekaran! Under the Insolvency and Bankruptcy Code (IBC), 2016, the relevant section dealing with the liquidator’s fees and expenses is:

Section 53 of IBC – Distribution of Assets

• This section lays down the order of priority in the distribution of the liquidation estate.

• Clause (6) of Section 53 specifically provides that the liquidator’s fees and expenses are paid before any repayment to creditors.

• The liquidation costs (including liquidator’s fees) are to be paid out of the liquidation estate.

But what if the liquidator doesn’t know the whereabouts of the corporate debtor or assets?

• The liquidator cannot directly charge creditors for expenses or remuneration beyond what is available in the liquidation estate.

• There is no provision in the IBC that allows the liquidator to charge creditors directly.

• The liquidator can only realize fees and expenses from the assets of the corporate debtor.

Summary:

• Liquidator’s fees and expenses are paid from the liquidation estate (assets of the corporate debtor), per Section 53(1)(c).

• If no assets or estate are found, the liquidator cannot charge creditors directly under IBC.

• In such cases, liquidator’s fees and expenses might remain unpaid or get settled by the Insolvency Professional Agency as per their norms, but no direct charge on creditors.