{"id":399509,"date":"2026-10-23T09:00:38","date_gmt":"2026-10-23T03:30:38","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=399509"},"modified":"2026-10-22T20:07:25","modified_gmt":"2026-10-22T14:37:25","slug":"resolution-professional-success-fee-regulation-34-b-cirp-regulations","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2026\/10\/23\/resolution-professional-success-fee-regulation-34-b-cirp-regulations\/","title":{"rendered":"Incentive or Windfall? Reconsidering the Resolution Professional’s “Success Fee” under Regulation 34-B"},"content":{"rendered":"
\n

This article critically examines the resolution professional’s success fee under Regulation 34-B of the CIRP Regulations, 2016, analysing its impact on creditor recoveries, impartiality, proportionality and insolvency law safeguards.<\/p>\n

Introduction<\/p>\n

The declared object of the Insolvency and Bankruptcy Code, 2016<\/a> is the resolution of a corporate debtor for the maximisation of value for the benefit of all its stakeholders. It is against that object that a provision introduced by the Insolvency and Bankruptcy Board of India in 2022 must be tested. Regulation 34-B(4)<\/a>, Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016<\/a> (CIRP Regulations<\/a>) permits the Committee of Creditors, “in its discretion”, to pay the resolution professional a performance-linked incentive fee “not exceeding five crore rupees”, and sub-regulation (5) directs that the fee “shall be included in the insolvency resolution process cost”.1<\/sup><\/a> The consequence is arresting: A discretionary bonus of up to Rs 5 crores is paid to the officer who conducts the process, and it is paid from the top of the estate — ahead of the very creditors for whose benefit value is said to be maximised.<\/p>\n

The novelty is sharpened by what came immediately before it. Barely a year earlier, in Jayesh N. Sanghrajka<\/span> v. Ariisto Developers (P) Ltd.<\/span><\/a> (CoC)<\/span>, the National Company Law Appellate Tribunal had held, in terms, that a resolution professional is not entitled to a “success fee” — a fee more in the nature of a contingency, speculative in character, and not contemplated by the Code or the Regulations — even where the Committee of Creditors had approved it.2<\/sup><\/a> Regulation 34-B(4)<\/a> reverses that holding by subordinate legislation. Whether it should stand is the question this article addresses.<\/p>\n

A distinction must be drawn at the very outset, for the criticism that follows is a narrow and deliberate one. The proviso to sub-regulation (2) allows the applicant or the Committee to fix a higher ordinary fee for the professional “for the reasons to be recorded”, taking into account market factors such as the size and scale of the corporate debtor’s business, the sector in which it operates, the level of its operating economic activity and the complexity of the process.3<\/sup><\/a> That power is unobjectionable, indeed salutary: It ties the reward to the real burden of running a real business, and it requires reasons. The objection of this article is confined to the discretionary success-fee bonus in sub-regulation (4), which does none of these things.<\/p>\n

The anatomy of Regulation 34-B<\/p>\n

The regulation has three limbs. Sub-regulation (2) prescribes a floor fee referable to Schedule I and permits, by its proviso, a reasoned enhancement of that ordinary fee on the business-related grounds just described. Sub-regulation (3) leaves the fee, after the scheduled period, to the applicant or the Committee. It is sub-regulation (4) that introduces the performance-linked incentive fee.<\/p>\n

That incentive has two components, drawn from Clauses 3 and 4 of Schedule I. The first rewards timely resolution by a percentage (in the range of ½ a per cent to 1 per cent) of the realisable value of the assets. The second rewards value maximisation by 1 per cent of the amount by which the value realised under the resolution plan exceeds the liquidation value. The two together are capped at Rs 5 crores — but the Committee may also, in the words of the sub-regulation, “extend any other performance-linked incentive structure as it deems necessary”.4<\/sup><\/a> The discretion is therefore not even confined to the Schedule.<\/p>\n

The decisive feature, however, is sub-regulation (5). The incentive fee is not paid by the financial creditors out of their own recoveries; it is “included in the insolvency resolution process cost”. Insolvency resolution process costs stand at the head of the distribution waterfall under Section 53(1)(a<\/span>)<\/a> of the Code<\/a>, payable in priority to secured financial creditors, to workmen, and to everyone below.5<\/sup><\/a> A rupee paid as success fee is thus a rupee taken off the top of the common pool, before a single creditor is paid. That is the fulcrum of the difficulty.<\/p>\n

The settled law the regulation displaced<\/p>\n

In Ariisto Developers<\/span><\/a>, the resolution professional claimed a success fee of Rs 3 crores, which the Committee had approved but the adjudicating authority had disallowed. The Appellate Tribunal upheld the disallowance. It reasoned that a success fee is speculative and contingent; that it finds no place in the Code or the Regulations; that, pushed through at the last meeting of the Committee, it “appears like an afterthought” and lacks transparency; and that it is inconsistent with the impartial role the professional is required to discharge. Crucially, the Tribunal rejected the argument that the Committee’s approval placed the matter beyond scrutiny.6<\/sup><\/a><\/p>\n

That reasoning did not stand alone; it flowed from the settled character of the office. In Swiss Ribbons (P) Ltd.<\/span> v. Union of India<\/span><\/a>, the Supreme Court described the resolution professional as an administrative facilitator, an officer supervised by the Committee and the adjudicating authority, whose functions do not extend to adjudication.7<\/sup><\/a> He is an officer of the process, not a stakeholder in it. A success fee, by contrast, gives that officer a personal, proprietary stake in the size and the shape of the outcome — the very thing the office was designed to exclude.<\/p>\n

The courts have also been clear that the professional’s remuneration is not a matter of the Committee’s untrammelled commercial wisdom. In Devarajan Raman<\/span> v. Bank of India Ltd.<\/span><\/a>, the Supreme Court held that any order fixing or directing payment of the professional’s fee must disclose the basis on which it is found reasonable; an ad hoc or unexplained figure cannot be sustained.8<\/sup><\/a> In Alok Kaushik<\/span>, it held that such fees form part of the corporate insolvency resolution process (CIRP) cost, are amenable to determination by the adjudicating authority under Section 60(5)(c<\/span>), and must be reasonable.9<\/sup><\/a> The commercial wisdom of the Committee, which the court has otherwise held to be paramount,10<\/sup><\/a> governs the resolution plan and the haircut the creditors are willing to accept — subject even there to the floor that operational creditors must receive at least their liquidation value.11<\/sup><\/a> It was never a licence to create, out of the common estate, a new priority payment to the process’s own officer.<\/p>\n

The judicial disfavour has, if anything, sharpened. In the most recent illustration, Ernst & Young LLP<\/span> v. Mobase Electronics India (P) Ltd.<\/span>, the National Company Law Tribunal, Chennai, was faced with a professional-services firm seeking to recover, through a petition under Section 9 of the Code<\/a>, a “success fee” of about Rs 2.78 crores — computed as 1 per cent of the tax relief it had obtained for the corporate debtor, against a fixed fee of only Rs 25 lakhs. The Tribunal declined to admit the petition, holding that a genuine pre-existing dispute existed, and, tellingly, directed that a copy of its order be forwarded to the Institute of Chartered Accountants of India for examination of the propriety of the outcome-linked fee under the applicable professional-conduct framework.12<\/sup><\/a> That case concerned an external adviser rather than the resolution professional, and the vehicle was Section 9 rather than a claim to a CIRP cost; but it confirms the deep suspicion with which contingent “success” fees continue to be regarded in the insolvency arena — a suspicion that Regulation 34-B(4)<\/a>, alone, now invites the Committee of Creditors to set aside.<\/p>\n

Why the success fee is unprincipled<\/p>\n

The first difficulty is arithmetical and it is the one that gives this article its title. Because the fee ranks as a CIRP cost, it is paid before the creditors. Yet the creditors in the average resolution are not being paid in full; they are accepting haircuts of the order of two-thirds, financial creditors realising around a third of their admitted claims and operational creditors a good deal less.13<\/sup><\/a> To pay the professional a discretionary bonus of up to Rs 5 crores off the top of a pool that is already being distributed at a fraction of face value is to reward the officer more surely than the creditors he serves. That is not value maximisation for stakeholders; it is value diverted from them.<\/p>\n

The second difficulty is structural, and it is the point on which the provision is, with respect, beyond reasoning. The Committee of Creditors is composed of financial creditors; operational creditors, as a rule, have no vote.14<\/sup><\/a> The resolution professional is appointed and confirmed by that Committee, works alongside it throughout, and depends on it for his continuance. To vest in that same Committee the discretion to award the professional a bonus — payable not from the financial creditors’ own pockets but from the common estate — is to create precisely the alignment of interest that insolvency law elsewhere strains to prevent. The financial creditors may well find a generous success fee worthwhile if the professional has enlarged their recovery; the operational creditors, who share in the dilution but not in the decision, have no such comfort. The Ariisto Developers<\/span><\/a>15<\/sup><\/a> concern about impartiality reappears here in structural form.<\/p>\n

The third difficulty lies in the metric. The value-maximisation incentive is measured as 1 per cent of the excess of realisable value over liquidation value. But it is the financial creditors who capture most of that excess; the operational creditors are, by statute, floored at liquidation value and rarely more. The incentive therefore rewards the professional for enlarging a surplus that accrues largely to one class, while the cost of the reward is borne by the estate as a whole. Reward and burden fall on different shoulders.<\/p>\n

The fourth difficulty is the open texture of the discretion. The cap of Rs 5 crores is a flat figure unrelated to the size of the estate: it applies alike to a Rs 20 crores resolution and to a Rs 5000 crores one, so that in a modest estate the fee may swallow a substantial slice of what little there is to distribute. And the licence to “extend any other performance-linked incentive structure as it deems necessary” frees the Committee even from the discipline of the Schedule. A discretionary payment of this magnitude, without a governing formula and without a proportionality anchor, is difficult to reconcile with the reasoned-fee requirement the Supreme Court has laid down.<\/p>\n

None of this denies that the tribunals retain a supervisory hand: a reasoned enhancement of the ordinary fee has been upheld where the Committee applied its mind16<\/sup><\/a>, and fees claimed for dormant periods or appropriated unilaterally have been cut down and ordered refunded.17<\/sup><\/a> But a well-designed regulation should not depend, for its fairness, on litigation after the event. The point of reconsideration is to build the safeguards into the provision, rather than to leave every excess to be undone case-by-case.<\/p>\n

The comparative picture<\/p>\n

It is instructive that a percentage or incentive element in an insolvency officer’s remuneration is neither novel nor objectionable in itself — what distinguishes the mature regimes is how it is disciplined. India’s own liquidation regime is the closest comparator, and it is telling that the same Board designed it very differently. Under Regulation 4<\/a> read with Schedule II<\/a> of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016<\/a> (Liquidation Process Regulations<\/a>), the liquidator’s fee is a percentage both of the amount realised and of the amount distributed, on a scale that declines both with the size of the estate and with the passage of time, and half the fee on realisation is payable only after distribution has actually occurred.18<\/sup><\/a> It is formula-driven, tied to money actually returned to stakeholders, self-limiting, and proportionate. The contrast with a flat, discretionary lump sum is stark.<\/p>\n

The position abroad points the same way. In the United States, Section 326, Bankruptcy Code caps a trustee’s commission as a declining percentage of the moneys actually disbursed to parties in interest — 25 per cent on the first $5000, tapering to 3 per cent above $1,000,000 — and Section 330 subjects even that to the court’s own determination of reasonableness.19<\/sup><\/a> In the United Kingdom, an office-holder’s remuneration is fixed by the creditors on a time-cost, percentage-of-realisations or set-amount basis, but it is always open to challenge and review by the court where it is excessive, and it is governed by an overarching principle of proportionality.20<\/sup><\/a><\/p>\n

Across these systems a common architecture emerges. An incentive element, where it exists, is 1) formula- or scale-based rather than a discretionary lump sum, 2) tied to value actually realised or distributed rather than to a notional figure, and 3) subject to independent scrutiny for reasonableness. Regulation 34-B(4)<\/a> possesses none of the three in mandatory form. It is discretionary; it is keyed to “realisable” value; and it treats the Committee’s approval as sufficient, when the Supreme Court has made reasonableness a matter for the adjudicating authority.<\/p>\n

The case for reconsideration<\/p>\n

The argument is not for the abolition of incentives — rewarding a professional who resolves a distressed business swiftly and for full value is legitimate policy — but for their recalibration. Five reforms suggest themselves. First<\/span>, the incentive should be tied to value actually distributed to creditors, not merely to “realisable” value, so that the professional is rewarded for what the stakeholders receive and not for a figure on paper. Second<\/span>, the flat Rs 5 crores cap should give way to a declining scale keyed to the size of the estate, on the model of the liquidation regime, so that the fee cannot become a disproportionate slice of a small pool. Third<\/span>, the incentive should be made expressly subject to the adjudicating authority’s scrutiny for reasonableness, codifying Devarajan Raman<\/span><\/a>21<\/sup><\/a> and Alok Kaushik<\/span>. Fourth<\/span>, its automatic priority as a CIRP cost should be reconsidered — whether by subordinating it to creditor distributions, or by funding it from the incremental financial-creditor recovery it is said to generate rather than from the common estate, so that operational creditors do not subsidise a metric that does not benefit them. Fifth<\/span>, the open-ended power to “extend any other performance-linked incentive structure as it deems necessary” should be deleted. Throughout, the reasoned enhancement power in the proviso to sub-regulation (2) can and should be retained; it is the discretionary bonus, not the enhanced ordinary fee, that needs the Board’s attention.<\/p>\n

Conclusion<\/p>\n

Incentivising a timely, value-maximising resolution is a sound aspiration, and the Board was right to try to further it. But the instrument it has chosen rewards the process’s own officer from the top of a pool that creditors are being asked to accept as depleted, through a discretion vested in the one class best placed to benefit from the alignment, by reference to a notional figure, and without the safeguards that comparable systems — and India’s own liquidation regime — treat as elementary. Until Regulation 34-B(4)<\/a> is re-tied to distribution, to a proportionate scale, and to independent scrutiny, it will remain what the Appellate Tribunal once called it: A speculative fee the Code did not contemplate — now wearing regulatory clothing.<\/p>\n<\/div>\n\n

*Former District Judge and a former Member, National Company Law Tribunal and National Company Law Appellate Tribunal (Delhi Bench), and practises as an advocate. Author can be reached at: office.vpsingh@gmail.com<\/a>.<\/span><\/strong><\/p>\n

1.<\/a> Inserted by the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2022<\/a>, w.e.f. 16-9-2022.<\/p>\n

2.<\/a> 2021 SCC OnLine NCLAT 617<\/a>.<\/p>\n

3.<\/a> Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016<\/a>, Regn. 34-B(2)<\/a>, Proviso.<\/p>\n

4.<\/a> Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016<\/a>, Regn. 34-B(4)<\/a> read with Sch. I<\/a>, Cls. 3 and 4. Cl. 3 provides an incentive for timely resolution (a percentage of realisable value, in the range of 0.5 per cent to 1 per cent); Cl. 4 provides an incentive for value maximisation equal to 1 per cent of the amount by which the value realised under the resolution plan exceeds the liquidation value.<\/p>\n

5.<\/a> Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016<\/a>, Regn. 34-B(5)<\/a>; Insolvency and Bankruptcy Code, 2016<\/a>, S. 5(13)<\/a> read with S. 53(1)(a<\/span>)<\/a>; and Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016<\/a>, Regn. 31<\/a> (insolvency resolution process costs are paid in priority, ahead of all other claims, in the distribution waterfall).<\/p>\n

6.<\/a> Jayesh N. Sanghrajka<\/span> v. Ariisto Developers (P) Ltd.<\/span><\/a> (CoC)<\/span><\/a>, 2021 SCC OnLine NCLAT 617<\/a>.<\/p>\n

7.<\/a> (2019) 4 SCC 17<\/a> : (2019) 213 Comp Cas 198.<\/p>\n

8.<\/a> (2022) 3 SCC 254<\/a> : (2022) 2 SCC (Civ) 90 : (2022) 17 Comp Cas-OL 738. The NCLAT had earlier held that the fixation of the resolution professional’s fee is not a business decision resting on the commercial wisdom of the Committee of Creditors.<\/p>\n

9.<\/a> Alok Kaushik<\/span> v. Bhuvaneshwari Ramanathan<\/span>, (2021) 15 Comp Cas-OL 724 : 2020 SCC OnLine NCLT 1435; the adjudicating authority is empowered under S. 60(5)(c<\/span>) to determine the fees and expenses forming part of the CIRP cost, which must be reasonable and are amenable to judicial scrutiny].<\/p>\n

10.<\/a> K. Sashidhar<\/span> v. Indian Overseas Bank<\/span><\/a>, (2019) 12 SCC 150<\/a> : (2019) 4 SCC (Civ) 222 : (2019) 213 Comp Cas 356; Essar Steel (India) Ltd. (CoC)<\/span> v. Satish Kumar Gupta<\/span><\/a>, (2020) 8 SCC 531<\/a> : (2020) 219 Comp Cas 97.<\/p>\n

11.<\/a> Insolvency and Bankruptcy Code, 2016<\/a>, S. 30(2)(b<\/span>)<\/a>; Essar Steel (India) Ltd. (CoC)<\/span> v. Satish Kumar Gupta<\/span><\/a>, (2020) 8 SCC 531<\/a> (operational creditors are entitled to at least the liquidation value of their claims).<\/p>\n

12.<\/a> Ernst & Young LLP<\/span> v. Mobase Electronics India (P) Ltd.<\/span>, 2026 SCC OnLine NCLT 5323. S. 9 petition, brought to recover an outcome-linked “success fee”, was dismissed on the ground of a pre-existing dispute, and the Tribunal directed that a copy of the order be forwarded to the Institute of Chartered Accountants of India for examination of the propriety of the fee.<\/p>\n

13.<\/a> IBBI data indicate that, in cases resolved under the Code, realisation by financial creditors has hovered around a third of admitted claims, with haircuts of the order of two-thirds (approximately 67 per cent up to September 2025): see<\/span> the IBBI Quarterly Newsletter and for example, Ruchika Chitravanshi, “Haircuts Touch 67% under IBC as Creditor Recovery Stays Low Till Sep 2025” (Business Standard<\/span>, 23-11-2025). Operational creditors ordinarily realise a far smaller fraction.<\/p>\n

14.<\/a> Insolvency and Bankruptcy Code, 2016<\/a>, S. 21<\/a> (the Committee of Creditors comprises the financial creditors; operational creditors have no vote save where the Committee is composed only of operational creditors).<\/p>\n

15.<\/a> Jayesh N. Sanghrajka<\/span> v. Ariisto Developers (P) Ltd.<\/span><\/a> (CoC)<\/span><\/a>, 2021 SCC OnLine NCLAT 617<\/a>.<\/p>\n

16.<\/a> M.K. Rajagopalan<\/span> v. Periasamy Palani Gounder<\/span><\/a>, (2024) 1 SCC 42<\/a> : (2023) 23 Comp Cas-OL 23 (a reasoned decision of the Committee to enhance the resolution professional’s fee was, on the facts, not an irregularity).<\/p>\n

17.<\/a> Rajputana Constructions (P) Ltd.<\/span> v. Rajasthan Land Holdings Ltd.<\/span>, (2026) 265 Comp Cas 632 (NCLAT). A resolution professional cannot charge fees for a period during which the process was stayed or dormant, and excess amounts may be directed to be refunded); Religare Finvest Ltd.<\/span> v. Resolve Support Services (P) Ltd.<\/span>, (2026) 268 Comp Cas 358 (NCLAT). Aa general approval to raise interim finance does not sanction unilateral appropriation of funds by the professional towards his own fees).<\/p>\n

18.<\/a> The liquidator’s fee is a percentage both of the amount realised and of the amount distributed, on a scale that declines with the size of the estate and with the passage of time (from 5 per cent and 2.5 per cent respectively on the first Rs 1 crore to fractions of a per cent on larger sums), and half of the fee on realisation is payable only after distribution.<\/p>\n

19.<\/a> U.S.C. § 326(a<\/span>) (limiting a trustee’s compensation to 25 per cent on the first $5000 of moneys disbursed, 10 per cent on the next amount up to $50,000, 5 per cent on the next up to $1,000,000, and reasonable compensation not exceeding 3 per cent thereafter) read with § 330 (all compensation is subject to the court’s determination of reasonableness).<\/p>\n

20.<\/a> Insolvency (England and Wales) Rules 2016, Part 18 (an office-holder’s remuneration is fixed by the creditors on a time-cost, percentage-of-realisations\/distributions or set-amount basis, and is subject to challenge and review by the court where excessive); on proportionality, see Brook<\/span> v. Reed<\/span>, (2012) 1 WLR 419 : 2011 EWCA Civ 331.<\/p>\n

21.<\/a> Devarajan Raman<\/span> v. Bank of India Ltd.<\/span><\/a>, (2022) 3 SCC 254<\/a> : (2022) 2 SCC (Civ) 90 : (2022) 17 Comp Cas-OL 738.<\/p>\n","protected":false},"excerpt":{"rendered":"

by V.P. Singh*<\/p>\n","protected":false},"author":67011,"featured_media":399510,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[42503,1191],"tags":[117802,32458,117803,42970,117800,31387,105576,82741,117801,117805,117799,117804,117798,51605,80188],"class_list":["post-399509","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal-analysis","category-op-ed","tag-cirp-cost","tag-committee-of-creditors","tag-creditor-recoveries","tag-ibbi-regulations","tag-ibc-success-fee","tag-insolvency-and-bankruptcy-code-2016","tag-insolvency-law-india","tag-insolvency-reforms","tag-insolvency-resolution-process-cost","tag-jayesh-n-sanghrajka-v-ariisto-developers","tag-regulation-34-b-cirp-regulations","tag-resolution-professional-remuneration","tag-resolution-professional-success-fee","tag-section-53-ibc","tag-value-maximisation"],"yoast_head":"\nResolution Professional\u2019s Success Fee under Regulation 34-B | SCC Times<\/title>\n<meta name=\"description\" content=\"An analysis of the resolution professional\u2019s success fee under Regulation 34-B, examining creditor recoveries, impartiality and regulatory reform.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/10\/23\/resolution-professional-success-fee-regulation-34-b-cirp-regulations\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Incentive or Windfall? 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