Insolvency resolution process costs: unapproved CIRP expenses not payable where committee of creditors did not approve, appeals dismissed

A creditor's claim for CIRP costs was rejected because those costs were never placed before or approved by the committee of creditors (CoC); approval of related party transactions under the insolvency process is distinct from CoC approval of CIRP costs and does not substitute for express cost approval, so extinguishment under a final resolution plan cannot be challenged where the CoC did not approve the cost. The adjudicating authority correctly dismissed the application seeking payment of the unapproved CIRP cost; the appellate tribunal examined merits and affirmed that absent CoC approval the claimed CIRP cost was not payable, and appeals were dismissed.

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Issues: (i) Whether amounts claimed by the appellant for supplies made to the corporate debtor during the CIRP constitute insolvency resolution process costs (CIRP cost) payable in priority; and (ii) whether such claimed CIRP costs were approved by the Committee of Creditors (CoC) so as to be payable after approval and implementation of the resolution plan.

Analysis: The definition of insolvency resolution process costs under Section 5(13) of the Insolvency and Bankruptcy Code, 2016 and the CIRP Regulations (Regulation 31 and Regulation 34) requires that costs incurred by the resolution professional in running the corporate debtor as a going concern and other costs directly relating to the CIRP be approved by the committee. Section 28(1)(f) mandates CoC approval for related party transactions. The Tribunal examined the CoC minutes relied upon and found them to record ratification/approval of related party transactions and separate discussion of CIRP costs, but not an approval of the appellant's claimed amounts as CIRP cost. Pre-CIRP claims dealt with in the approved resolution plan stand extinguished under the established doctrine on plan finality; however, sums properly constituting CIRP cost may be determined by the adjudicating authority under Section 60(5)(c) if they were placed and approved as CIRP costs. On the facts before the Tribunal, the claimed supplies during CIRP were not placed before or approved by the CoC as insolvency resolution process costs and the CoC minutes relied upon related to related party transaction ratification rather than specific approval of the claimed CIRP costs.

Conclusion: The claimed amounts do not qualify as CIRP costs payable in priority because they were not placed before and approved by the Committee of Creditors as insolvency resolution process costs; the adjudicating authority's rejection of the applications is upheld. The appeals are dismissed and the outcome is against the appellant.

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