IRPs make merry as fees cross Rs 1 crore for top NCLT cases

Soured debt hitting record levels is not bad news for all. For insolvency resolution professionals, it has brought a big boom in business, with fees crossing Rs 1 crore in case of some of the large companies going to National Company Law Tribunal (NCLT) for resolution.

Fees for resolution professionals are now oscillating from Rs 25 lakh for mid-sized companies to about over Rs 1 crore for companies like Bhushan Steel, sources among IRPs said. Even for smaller companies, fees are not below Rs 5 lakh.

The competition is high though and many have resorted to undercutting to get mandates.

"Currently, fees being quoted by high-quality resolution professionals have crossed Rs 1 crore in some of the big names that have gone for resolution. There is stiff competition among the resolution professionals but the fees, at least in such big cases, are reasonable as professionals understandably have to assume the role of the Board which they replace," an IRP professional who has won few of the mandates at prices higher than Rs 1 crore told DNA Money on condition of anonymity.

As for small to mid-sized companies, fees vary between Rs 5 lakh and Rs 25 lakh, another IRP said.

"The fees, which are being quoted, are so far fair as we have to gather expertise from several fields, from management personnel to valuers to assist us in our mandated responsibilities who needed to be paid off from our share of fees. Also, this is the lumpsum fees we quote, valid over the period of resolution," the larger IRP said.

While IRPs are supposed to get selected by creditors and bankers on several factors including their experiences and resources that are there at their disposal, in many cases it is the fee quoted that becomes the deciding factor, industry insiders said.

"This might bring trouble as many IRPs might quote ridiculously low price just to get the mandate and then compromise on the quality of service," the IRP said.

It is believed that there are cases where IRP might have got into some nexus with the promoters and cases where the IRP has been removed even after getting selected and initial work of assessment started.

The issue of fees being charged by IRPs and the rationale behind it have rattled the Insolvency and Bankruptcy Board of India (IBBI) as well.

"It is clarified that an insolvency professional shall render services for a fee which is a reasonable reflection of his work, raise bills/invoices in his name towards such fees, and such fees shall be paid to his bank account. Any payment of fees for the services of an insolvency professional to any person other than the insolvency professional shall not form part of the insolvency resolution process cost," IBBI has said in a recent circular.