Section 34(8) & 34(9): IBC Liquidator Fees: Structure, Calculation & Rules 

Section 34(8) and 34(9) of the Insolvency and Bankruptcy Code (IBC) address the entitlement of the liquidator to fees and stipulate that such fees shall be paid from the proceeds of the liquidation estate; however, they do not prescribe the fee structure or the methodology for determining the quantum of such fees. The IBBI (Liquidation Process) Regulations, 2016, specifically Regulation 4, along with the clarification issued by IBBI, provide the detailed fee slabs, payment timelines, and conditions (such as realization-linked fees, distribution-linked fees, etc.). It is pertinent to mention that liquidation cost includes Liquidator fee.

Section 34(8) – Fee structure for Liquidator as prescribed by the IBBI.

An Insolvency Professional proposed to be appointed as the liquidator shall charge a fee for conducting the liquidation proceedings in such manner and proportion to the value of the liquidation estate assets as may be specified by the Insolvency and Bankruptcy Board of India (IBBI).

Bare Text of Section 34(8) – IBC-

“(8) An insolvency professional proposed to be appointed as a liquidator shall charge such fee for the conduct of the liquidation proceedings and in such proportion to the value of the liquidation estate assets, as may be specified by the Board.”

This provision ensures a regulated, fair, and transparent fee structure for liquidators. It is intended to prevent excessive or arbitrary fee claims by insolvency professionals and to align the liquidator’s remuneration with the value, scale, and complexity of the liquidation estate. By linking the fee to the estate’s value, it promotes accountability, proportionality, and consistency in the conduct of liquidation proceedings.

Section 34(9) – Payment of Liquidator’s Fees from Liquidation Estate proceeds.

The fees payable to the liquidator for conducting the liquidation proceedings, as referred to in sub-section (8), shall be paid from the proceeds of the liquidation estate in accordance with the distribution waterfall laid down under Section 53 of the Code.

Bare Text of Section 34(9) – IBC-

“(9) The fees for the conduct of the liquidation proceedings under sub-section (8) shall be paid to the liquidator from the proceeds of the liquidation estate under section 53.”

Section 5(16) of IBC defines “liquidation cost” as any cost incurred by the liquidator during the period of liquidation, subject to such regulations as may be specified by the IBBI.

In line with this, Regulation 2(ea)(i) of the IBBI (Liquidation Process) Regulations, 2016 further clarifies that liquidation cost includes the fee payable to the liquidator, as determined under Regulation 4 of the same regulations. Accordingly, the liquidator’s fee forms part of the liquidation cost and shall enjoy first priority in distribution from the liquidation estate as per the waterfall mechanism prescribed under Section 53 of the IBC.

Regulation 4- Liquidator’s Fee.

It is pertinent to note that Regulation 4 was amended and substituted by Notification No. IBBI/2019-20/GN/REG 047, dated 25th July 2019, with effect from the same date.

Prior to substitution, Regulation 4 read as under-

“4. Liquidator’s fee. (1) The fee payable to the liquidator shall form part of the liquidation cost.

(2) The liquidator shall be entitled to such fee and in such manner as has been decided by the committee of creditors before a liquidation order is passed under sections 33(1)(a) or 33(2).

(3) In all cases other than those covered under sub-regulation (2), the liquidator shall be entitled to a fee as a percentage of the amount realized net of other liquidation costs, and of the amount distributed, as under:

Amount of Realization/ Distribution (in Rs.)	Percentage of fee on the amount realized/distributed
	In the first six months	In the next six months	In the next one year	Thereafter
Amount of Realization (exclusive of liquidation costs)
On the first Rs. 1 crore	5.00	3.75	2.50	1.88
On the next Rs. 9 crores	3.75	2.80	1.88	1.41
On the next Rs. 40 crores	2.50	1.88	1.25	0.94
On the next Rs. 50 crores	1.25	0.94	0.63	0.51
On the further sums realized	0.25	0.19	0.13	0.10
Amount distributed to stakeholders
On the first Rs. 1 crore	2.50	1.88	1.25	0.94
On the next Rs. 9 crores	1.88	1.40	0.94	0.71
On the next Rs. 40 crores	1.25	0.94	0.63	0.47
On the next Rs. 50 crores	0.63	0.48	0.34	0.25
On the further sums distributed	0.13	0.10	0.06	0.05

(4) The liquidator shall be entitled to receive half of the fee payable on realization under sub regulation (3) only after such realized amount is distributed.”.

Pursuant to the said amendment, Regulation 4 read as under-

“4. (1) The fee payable to the liquidator shall be in accordance with the decision taken by the committee of creditors under regulation 39D of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

(1A) Where no fee has been fixed under sub-regulation (1), the consultation committee may fix the fee of the liquidator in its first meeting.

(2) In cases other than those covered under sub-regulation (1) and (1A), the liquidator shall be entitled to a fee-

(a) at the same rate as the resolution professional was entitled to during the corporate insolvency resolution process, for the period of compromise or arrangement under section 230 of the Companies Act, 2013 (18 of 2013); and

(b) as a percentage of the amount realized net of other liquidation costs, and of the amount distributed, for the balance period of liquidation, as under:

Amount of Realization/ Distribution (in Rs.)	Percentage of fee on the amount realized/distributed
	In the first six months	In the next six months	Thereafter
Amount of Realization (exclusive of liquidation costs)
On the first Rs. 1 crore	5.00	3.75	1.88
On the next Rs. 9 crores	3.75	2.80	1.41
On the next Rs. 40 crores	2.50	1.88	0.94
On the next Rs. 50 crores	1.25	0.94	0.51
On the further sums realized	0.25	0.19	0.10
Amount distributed to stakeholders
On the first Rs. 1 crore	2.50	1.88	0.94
On the next Rs. 9 crores	1.88	1.40	0.71
On the next Rs. 40 crores	1.25	0.94	0.47
On the next Rs. 50 crores	0.63	0.48	0.25
On the further sums distributed	0.13	0.10	0.05

Clarification: For the purposes of clause (b), it is hereby clarified that where a liquidator realises any amount, but does not distribute the same, he shall be entitled to a fee corresponding to the amount realised by him. Where a liquidator distributes any amount, which is not realised by him, he shall be entitled to a fee corresponding to the amount distributed by him.

(3) Where the fee is payable under clause (b) of sub-regulation (2), the liquidator shall be entitled to receive half of the fee payable on realisation only after such realised amount is distributed.

Clarification: Regulation 4 of these regulations, as it stood before the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 shall continue to be applicable in relation to the liquidation processes already commenced before the coming into force of the said amendment Regulations.”

Regulation 4(1)- Liquidator’s Fee be decided by CoC.

Present sub-regulation (1) of Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016 provides that the fee payable to the liquidator shall be in accordance with the decision taken by the CoC under Regulation 39D of the IBBI (CIRP) Regulations, 2016. This regulation allows the CoC to fix the liquidator’s fee during CIRP. In simple terms, the CoC decides the liquidator’s fee during the CIRP, and once liquidation begins, this pre-approved fee becomes part of the liquidation cost and is paid from the liquidation estate.

The amendment aligns the fee structure with decisions taken by the CoC under Regulation 39D of the IBBI (CIRP) Regulations, 2016. This enhances creditor control and ensures that the fee is reasonable, performance-linked, and pre-approved.

It is also pertinent to mention that, pursuant to the aforesaid amendment in Regulation 4, a new Regulation 39D was inserted into the CIRP Regulations vide Notification No. IBBI/2019-20/GN/REG 048, dated 25th July 2019, with effect from the same date, which read as under-

“Regulation 39D: Fee of the liquidator.

39D. While approving a resolution plan under section 30 or deciding to liquidate the corporate debtor under section 33, the committee may, in consultation with the resolution professional, fix the fee payable to the liquidator, if an order for liquidation is passed under section 33, for –

(a) the period, if any, used for compromise or arrangement under section 230 of the Companies Act, 2013;

(b) the period, if any, used for sale under clauses (e) and (f) of regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016; and

(c) the balance period of liquidation.”

Regulation 39D of IBBI (CIRP) Regulations, 2016, requires the CoC to fix the fee of the liquidator, in consultation with RP, at the time of:

1. Approving the resolution plan, or

2. Taking a decision to liquidate the corporate debtor under Section 33(1)(b).

As per Regulation 39D of IBBI (CIRP) Regulations, 2016, the fee payable to the liquidator may be structured across distinct phases of the liquidation process, depending on the nature of activities undertaken. These phases include:

1. Period used for compromise or arrangement under Section 230 of the Companies Act, 2013 (CA 2013): Applicable where an effort is made to revive the Corporate Debtor through a scheme of compromise or arrangement with creditors or members, in accordance with Section 230 of CA 2013. The liquidator’s fee for this phase compensates for the work involved in preparing, facilitating, and supervising the scheme.

2. Period used for sale under clauses (e) and (f) of Regulation 32: Covers efforts towards the sale of the corporate debtor or its business as a going concern, as envisaged under Regulation 32(e) and 32(f) of the IBBI (Liquidation Process) Regulations, 2016. These processes often require significant time, marketing effort, and regulatory coordination, justifying a separate fee component.

3. Balance period of liquidation: Refers to the residual period of the liquidation process, which typically involves asset realisation, claims verification, adjudication, and distribution of proceeds under Section 53 of the IBC. The fee during this stage is typically linked to the management, administration, and closure of the liquidation estate.

This structure ensures that the liquidator is compensated appropriately for each phase, reflecting the complexity and intensity of the tasks performed.

Example 1: ABC Ltd. undergoes CIRP, but no resolution plan is approved. The CoC decides to liquidate the company under Section 33(1)(b) of the IBC. At the time of liquidation, as required by Regulation 39D, the CoC, in consultation with the Resolution Professional, fixes the fee structure for the appointed liquidator, under Regulation 4 of the Liquidation Process Regulations, 2016. The CoC decides to structure the liquidator’s fee across three possible phases of liquidation as under-

1. Period used for compromise or arrangement under Section 230 of the CA 2013: ₹ 2,00,000/- per month.

2. Period used for sale under clauses (e) and (f) of Regulation 32: ₹ 3,00,000/- per month.

3. Balance period of liquidation: ₹1,50,000/- per month.

1. Phase 1: Compromise or Arrangement under Section 230 of CA 2013.

• The liquidator initiates a compromise/arrangement process as allowed under Section 230 of CA 2013, attempting to revive the company by proposing a scheme with creditors. This process includes:
  • Calling meetings of creditors and shareholders
  • Drafting a scheme of arrangement
  • Filing applications with NCLT
  • Managing timelines and disclosures
• Outcome: The scheme is not approved.
• Time Taken: 2 months

In view of the fee fixed by CoC as ₹2,00,000 per month, therefore total fee for this Phase: ₹4,00,000

2. Phase 2: Attempt to Sell the Corporate Debtor as a Going Concern [Regulation 32(e)/(f)]

• The liquidator attempts a going concern sale of entire corporate debtor [Reg. 32(e)], or Business unit as a going concern [Reg. 32(f)]
• Activities include:
  • Preparing Information Memorandum (IM)
  • Inviting bids via auction notices
  • Engaging with interested bidders and consultants
  • Complying with Regulation 32A (valuation, marketing, and sale conditions)
• Outcome: Despite efforts, no suitable bid is received.
• Time Taken: 3 months

In view of the fee fixed by CoC as ₹3,00,000 per month, therefore total fee for this Phase: ₹9,00,000

3. Phase 3: Balance Period of Liquidation.

• The liquidator proceeds with:
  • Sale of assets piecemeal (immovable property, plant & machinery, receivables)
  • Verification and admission of claims
  • Distribution of proceeds under Section 53
  • Filing progress and final reports with NCLT
  • Closure of liquidation estate
• Time Taken: 6 months

In view of the fee fixed by CoC as ₹1,50,000 per month, therefore total fee for this Phase: ₹9,00,000

Regulation 4(1A)- Liquidator’s Fee be decided by Stakeholders’ Consultation Committee (SCC).

Regulation 4 was further amended and substituted by Notification No. IBBI/2022-23/GN/REG 094, dated 16th September 2022, with effect from the same date. Through this amendment, sub-regulation (1A) was inserted into the regulation.

Sub-regulation (1A) Regulation 4 read as under-

“(1A) Where no fee has been fixed under sub-regulation (1), the consultation committee may fix the fee of the liquidator in its first meeting.”

This sub-regulation acts as a fallback mechanism. If the CoC did not fix the liquidator’s fee during the CIRP under Regulation 39D, then the Stakeholders’ Consultation Committee (SCC) (formed during liquidation) is empowered to do so. The SCC must fix the fee in its first meeting, ensuring that the fee structure is decided early in the liquidation process to avoid delays and disputes.

Regulation 4(2)- When CoC and SCC not decide the Liquidator’s Fee.

Regulation 4(2) applies in cases where the liquidator’s fee has not been fixed under:

• Regulation 4(1) – where the CoC has fixed the fee under Regulation 39D of the IBBI (CIRP) Regulations, 2016, or
• Regulation 4(1A) – where the SCC has fixed the fee in its first meeting.

In such cases, the liquidator shall be entitled to a fee as follows:

1. For the Period of Compromise or Arrangement (Section 230 of the CA, 2013): The liquidator shall be entitled to receive a fee at the same rate as was payable to the Resolution Professional during the CIRP.

2. For the Balance Period of Liquidation: The liquidator shall be entitled to a fee based on performance, calculated as a percentage of:

• • The amount realised (net of other liquidation costs), and
  • The amount distributed to stakeholders.

The applicable percentages are prescribed in the Table under Regulation 4(2)(b), which is a slab-based incentive structure.

Example: The CoC did not fix the liquidator’s fee under Regulation 39D. The SCC also failed to fix the fee in its first meeting. Therefore, Regulation 4(2) applies for calculating the liquidator’s fee.

1. Period of compromise or arrangement under Section 230:

• Duration: 2 months
• During CIRP, assuming the Resolution Professional was entitled to a fee of ₹2,50,000 per month. So, the liquidator is entitled to ₹2,50,000 × 2 = ₹5,00,000

2. Balance period of liquidation (including sale, distribution, closure):

• Duration: 6 months
• Total amount realised (from asset sales): ₹20 crore
• Total amount distributed to stakeholders: ₹18 crore

Step-by-Step Fee Calculation (for Realisation and Distribution)

1. Fee on Amount Realised – ₹20 crore

Slab	Amount in Slab (₹)	Rate (%)	Fee (₹)
First ₹1 crore	1,00,00,000	5.00	5,00,000
Next ₹9 crore (₹1–10 crore)	9,00,00,000	3.75	33,75,000
Next ₹10 crore (₹10–40 crore)	10,00,00,000	2.50	25,00,000
Total Fee on Realisation			63,75,000

B. Fee on Amount Distributed – ₹18 crore

Slab	Amount in Slab (₹)	Rate (%)	Fee (₹)
First ₹1 crore	1,00,00,000	2.50	2,50,000
Next ₹9 crore (₹1–10 crore)	9,00,00,000	1.88	16,92,000
Next ₹8 crore (₹10–40 crore)	8,00,00,000	1.25	10,00,000
Total Fee on Realisation			29,42,000

Total Liquidator’s Fee Payable [Regulation 4(2)]:

Component	Amount (₹)
Fee for Section 230 period	5,00,000
Fee on Realisation	63,75,000
Fee on Distribution	29,42,000
Total Fee Payable	98,17,000

Clarification to Table under Regulation 4(2)(b).

A clarification to the fee structure table under Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016 was introduced through Notification No. IBBI/2020-21/GN/REG 062, dated 5th August 2020, with effect from the same date. This clarification was aimed at ensuring greater transparency and precision in the computation of the liquidator’s fee on the amounts realised and distributed during the liquidation process. The said clarification read as under-

“Clarification: For the purposes of clause (b), it is hereby clarified that where a liquidator realises any amount, but does not distribute the same, he shall be entitled to a fee corresponding to the amount realised by him. Where a liquidator distributes any amount, which is not realised by him, he shall be entitled to a fee corresponding to the amount distributed by him.”

Regulation 4(2)(b) provides a performance-linked fee structure for liquidators based on:

• The amount realised from the liquidation estate, and
• The amount distributed to stakeholders.

However, practical scenarios arose where:

• A liquidator realised assets but did not distribute them (e.g., due to resignation, removal, or delay).
• Another liquidator distributed funds that were not realised by them.

This led to ambiguity about who was entitled to the fee — the liquidator who realised the amount or the one who distributed it. The clarification to Regulation 4(2)(b) was introduced to ensure clarity, fairness, and accountability in the fee structure for liquidators, especially in situations involving multiple professionals during the liquidation process.

According to Clarification to Regulation 4(2)(b), if a liquidator collects or realises money by selling assets but doesn’t distribute it—for example, because they resign or are replaced—they are still entitled to receive a fee for the amount they realised. This fee is calculated based on the percentage slabs provided in the regulation. The rule ensures that the liquidator is fairly paid for the work they have done, even if someone else completes the rest of the liquidation process.

Further, according to Clarification to Regulation 4(2)(b), if a liquidator distributes money that was not realised by them—such as funds collected earlier by another liquidator or received through a Section 230 scheme or legal award—they are still entitled to a fee based on the amount they actually distribute. This ensures that even if the liquidator didn’t realise the funds, they are fairly compensated for the work involved in verifying claims, allocating amounts, and handling the distribution process.

Therefore, the purpose of the clarification is

• To ensure fairness in fee allocation when more than one liquidator is involved.
• To recognize the work performed separately – one for realising assets, another for administering payments.
• To avoid double compensation or disputes between liquidators.

For example, suppose Liquidator A realises ₹10 crore by selling the assets of the Corporate Debtor but resigns before distributing the amount. Liquidator B is then appointed and proceeds to distribute the same ₹10 crore to the stakeholders. In this case, both liquidators are entitled to fees for their respective contributions. Liquidator A will receive a fee for the amount realised, and Liquidator B will receive a fee for the amount distributed. This approach ensures that each professional is fairly compensated for the specific part of the liquidation process they handled, maintaining both clarity and fairness.

Regulation 4(3) – Deferred Payment of fee on realisation.

According to Regulation 4(3), when the liquidator’s fee is calculated based on the amount realised and distributed under Regulation 4(2)(b), the fee on realisation is split. The liquidator is entitled to:

• Only half of the fee on the realised amount at the time of realisation, and
• The remaining half of the realisation-based fee only after that amount is actually distributed to stakeholders.

It ensures the liquidator doesn’t focus only on realising assets but also ensures timely distribution. It promotes completion of the liquidation process, not just partial performance.

For instance, if a liquidator realises ₹10 crore and, as per the applicable slab under Regulation 4(2)(b), is entitled to a fee of ₹33.75 lakh on the amount realised, they will receive only half of that fee i.e., ₹16.87 lakh at the time of realisation. The remaining ₹16.87 lakh will be payable only after the ₹10 crore is actually distributed to the stakeholders. This ensures that the liquidator completes both key stages realisation and distribution before receiving the full fee.

CIRCULAR NO. IBBI/LIQ/61/2023 28TH SEPTEMBER, 2023.

The IBBI through its circular dated 28th September 2023, has issued a Circular for Clarification w.r.t. Liquidators’ fee under clause (b) of sub-regulation (2) of Regulation 4 of IBBI (Liquidation Process) Regulations, 2016

No. 1. Clarification on treatment of Liquid Assets.

The IBBI through its circular dated 28th September 2023, clarified the treatment of liquid assets with respect to the liquidator’s fee under Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016.

It states that where an asset is already in liquid form at the time of commencement of liquidation such as cash in bank, fixed deposits (FDs), mutual funds, or market-traded (quoted) shares no “realisation” is deemed to have occurred. Accordingly, the liquidator is not entitled to any fee on realisation for such assets. However, the liquidator is entitled to a fee on distribution of these liquid assets in accordance with the percentage-based fee schedule provided under Regulation 4(2)(b).

The term “amount realised” is thus to be interpreted as the proceeds generated from converting non-liquid assets into cash—for example, sale of real estate, recovery of dues, or disposal of plant and machinery.

No. 2. Clarification on “Other Liquidation Cost” under Regulation 4(2)(b).

The IBBI through its circular dated 28th September 2023, clarified the meaning of “other liquidation cost” as referred to in Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016.

According to the clarification: “Other Liquidation Cost” shall refer to the liquidation costs paid in priority under Section 53(1)(a) of IBC, after excluding the liquidator’s fee.

Section 53(1)(a) provides that the proceeds from the sale of liquidation assets shall be used: “first, to the costs of the insolvency resolution process and the liquidation costs in full.” The liquidator’s fee, although part of the overall liquidation cost, is treated separately for the purpose of calculating fees under Regulation 4(2)(b). Therefore, when calculating the liquidator’s fee based on “realisation minus other liquidation costs”, the liquidator’s own fee must not be included in the deduction as part of “other liquidation costs”.

This clarification avoids double deduction of the liquidator’s fee from the calculation base and ensures fair and accurate computation of the fee payable under the default percentage-based structure.

Example: Amount Realised from sale of non-liquid assets ₹10 crore. Other liquidation costs (excluding liquidator’s fee): ₹40 lakh. Liquidator’s fee as per the applicable slab is 5% on net realisation (assumed for this example).

Step-by-Step Computation:

1. Amount Realised = ₹10,00,00,000

2. Less: Other Liquidation Costs (paid under Section 53(1)(a), excluding liquidator’s fee) = ₹40,00,000

3. Net Realisation for calculating fee = ₹10,00,00,000 – ₹40,00,000 = ₹9,60,00,000

4. Liquidator’s Fee @ 5% of ₹9.6 crore = ₹48,00,000

The “other liquidation costs” of ₹40 lakh are deducted before computing the liquidator’s fee. The liquidator’s own fee is not included in this ₹40 lakh deduction, as clarified by IBBI. This ensures the fee is calculated only on the net value available, not diminished by the fee itself.

No. 3. Clarification on incorrect calculation of liquidator’s fee on Distribution.

The table under Regulation 4(2)(b) of the IBBI (Liquidation Process) Regulations, 2016 provides for the liquidator’s fee to be calculated as a percentage of the “amount distributed to stakeholders”. However, it has been observed in some cases that liquidators have erroneously included the following in the distribution base for calculating their fee:

• CIRP cost,
• Liquidation cost, including the expenses incurred in running the business of the Corporate Debtor during liquidation (such as maintenance, wages, utilities, etc.).

A conjoint reading of the following provisions:

• Regulation 4(2)(b) – which prescribes the fee structure for the liquidator,
• Regulation 42(2) – which outlines the order of distribution of proceeds, and
• Regulation 42(3) – which specifies the timeline for distribution,

clearly mandates that the liquidator must distribute the proceeds from realisation only after deducting:

• Insolvency Resolution Process (CIRP) costs, and
• Liquidation costs, including the liquidator’s own fee and any costs incurred in running the Corporate Debtor during the liquidation process.

These deductions are not distributions to stakeholders within the meaning of Section 53 of the IBC, and hence, must not be included in the base for computing the liquidator’s fee on distribution.

No. 4. Clarification on fee calculation based on “Amount of Realisation / Distribution” and Time Periods.

It is clarified that the expression “Amount of Realisation / Distribution” used in Regulation 4(2)(b) refers to the cumulative value of realisation or distribution made by the liquidator since the commencement of liquidation.

It is observed by IBBI that different interpretations are being made for the words “Amount of Realisation /Distribution” used in table in the Regulation 4(2)(b). Though, most of them are interpreting it correctly to mean the cumulative value of assets realised till date, few are interpreting it to mean the value of assets realised during the first six months and then next six months and so on. The words “Amount of Realisation /Distribution” are mentioned in column 1 only. Other columns are for percentage of fees on such realisation/distribution. Thus, the cumulative value of amount realised/ distributed is to be bifurcated in various slabs as per column 1. Only after that, liquidator has to divide the amount realised in a particular slab based on the tenure in which it was realised such as in first six months, next six months or thereafter. Out of the total amount pertaining to that slab, for the amount realised in first six months, % of fees will be as per column 2; for the amount realised in next six months, % of fees will be as per column 3; and for the amount realised thereafter, % of fees will be as per column 4.

The correct methodology for calculating the liquidator’s fee is as follows:

1. First, the cumulative amount realised or distributed is to be segregated across the slabs specified in Column 1 of the table under Regulation 4(2)(b).

2. Next, for each slab, the liquidator must further bifurcate the amount based on the time period in which the realisation/distribution occurred:

• Amount realised within the first six months: the applicable fee percentage will be as per Column 2.
• Amount realised in the next six months: the applicable fee percentage will be as per Column 3.
• Amount realised thereafter: the applicable fee percentage will be as per Column 4.

Example: Assume the liquidation commencement date is 01.11.2021. Further, the liquidation cost and period spent on compromise or arrangement are nil. The liquidator has realised Rs.10 crore on 01.01.2022 and another Rs.1 crore on 01.10.2023.

Liquidator’s fee – erroneously computed:

Liquidator fee while interpreting “Amount of Realisation /Distribution” to mean value of assets realised during the first six months and then next six months period and so on, without considering the slab value of assets, computed as under:

Particulars	In first 6 months	Fee	In next 6 months	Fee
On the first 1 crore	5.00%	5,00,000	3.75%	3,75,000
On the first 9 crore	3.75%	33,75,000
Total		38,75,000		3,75,000
Total Fee				42,50,000

In the same illustration, if we consider that entire Rs 11 crores was realised within 6 months, the calculation of the liquidator fee is as under:

Particulars	In first 6 months	Fee
On the first 1 crore	5.00%	5,00,000
On the first 9 crore	3.75%	33,75,000
On the first 40 crore	2.80%	2,80,000
Total fee		41,55,000

In the above illustrations, the liquidator is getting more fee if he realises the assets within 12 months in comparison to realisation of the assets within 6 months which is against the spirit of the regulation. Thus, it is clear that the cumulative value of amount realised/ distributed is to be bifurcated in various slabs as per column 1. Only after that, the liquidator has to divide the amount realised in a particular slab based on the tenure in which it was realised such as in first six months, next six months or thereafter. Thereafter, fee rate for various amounts realised in various periods are to be taken as per columns 2, 3 and 4.

No. 5. Clarification on exclusion of period for fee calculation under Regulation 4(2)(b).

The exclusion of any period for the purpose of calculating the liquidator’s fee under Regulation 4(2)(b) shall be permissible only when:

1. Such exclusion has been explicitly ordered by the Hon’ble NCLT, NCLAT, or any other court of law, and

2. It shall apply only in relation to the specific asset(s) that could not have been realised during the excluded period due to the circumstances addressed in the judicial order.

Conclusion: Regulation 4 ensures a transparent and structured mechanism for liquidator fees, balancing stakeholder interests and professional remuneration. The Board’s clarification reinforces that the liquidator is entitled to separate fees on both realisation and distribution activities, preventing ambiguity and disputes over fee entitlements.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.