Section 144: Fees of Bankruptcy Trustee under the Insolvency and Bankruptcy Code 2016
Section 144 of the Insolvency and Bankruptcy Code, 2016 governs the fees of a bankruptcy trustee appointed to conduct the bankruptcy process. It links the trustee's remuneration to the value of the bankrupt's estate and provides for payment through distribution of that estate in the manner specified by Section 178.
Section 144 - Fees of bankruptcy trustee
(1) A bankruptcy trustee appointed for conducting the bankruptcy process shall charge such fees as may be specified in proportion to the value of the estate of the bankrupt.
(2) The fees for the conduct of the bankruptcy process shall be paid to the bankruptcy trustee from the distribution of the estate of the bankrupt in the manner provided in Section 178.
Who is a bankruptcy trustee?
For Part III of the Code, Section 79 defines a bankruptcy trustee as the insolvency professional appointed as trustee for the estate of the bankrupt under Section 125. The bankruptcy trustee administers the estate and carries out the statutory functions assigned under the Code and applicable regulations.
How is the bankruptcy trustee's fee determined?
Section 144(1) requires the bankruptcy trustee to charge the fee specified for conducting the bankruptcy process in proportion to the value of the bankrupt's estate. The detailed fee framework for bankruptcy proceedings that are governed by the Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 is addressed in Regulation 4 and the applicable Schedule to those regulations.
Payment from the bankruptcy estate
Section 144(2) expressly provides that the bankruptcy trustee's fee for conducting the bankruptcy process is paid from distribution of the bankrupt's estate. The payment must follow the statutory distribution mechanism contained in Section 178.
Section 178 and priority of payment
Section 178 lays down the priority for distribution of the final dividend in a bankruptcy process. Costs and expenses incurred by the bankruptcy trustee for the bankruptcy process are dealt with in that statutory waterfall. Section 144 therefore does not operate independently from the distribution provisions governing the bankrupt's estate.
Current regulatory framework
For bankruptcy processes of personal guarantors to corporate debtors, the applicable regulatory framework includes the Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019, as amended. The IBBI legal framework should be consulted for the current consolidated regulations, amendments, circulars and prescribed forms applicable to a particular proceeding.
Related provisions
Section 144 should be read with Section 143 - Standard of conduct, Section 145 - Replacement of bankruptcy trustee, Section 149 - Functions of bankruptcy trustee, Section 150 - Duties of bankrupt towards bankruptcy trustee, and Section 178 concerning priority of payment of debts.