Claims cannot be Automatically Treated as CIRP Costs unless directly related to CIRP and approved by CoC: NCLAT

In a recent case, the National Company Law Appellate Tribunal (NCLAT) clarified that claims cannot automatically qualify as Corporate Insolvency Resolution Process (CIRP) costs unless they are directly related to the CIRP and approved by the Committee of Creditors (CoC). The dispute arose from a subcontractor's claim under a contract tied to a main contract with NTPC, where the liquidator, Mr. Avil Menezes, determined the claim did not meet CIRP cost criteria, citing CoC decisions and IBC provisions. \r

The NCLT Mumbai initially directed the claim to be treated as a CIRP cost, but the NCLAT overturned this decision, emphasizing that such costs require CoC approval and must directly support the CIRP objectives. The NCLAT's ruling underscored the importance of adhering to regulatory provisions and contractual terms in determining CIRP costs, aligning with IBBI guidelines and the IBC's stipulations.