A financial creditor is liable to pay CIRP cost only for the period it was part of CoC

If a financial creditor is part of the committee of Creditors (CoC) then it has to pay the CIRP cost, albeit only for the period during which it actually was the part of the CoC.

In a recent order, the National Company Law Appellate Tribunal (NCLAT) upheld the order of the New Delhi bench of the NCLT directing Neogrowth Credit Private Ltd, a member of the CoC in the corporate insolvency resolution process (CIRP) of Bhaskar Marine Services Pvt Ltd, to pay 27% of the CIRP cost.

The appellant, Neogrowth Credit Pvt Ltd, had moved the appellate tribunal against the NCLT order citing that it had withdrawn its claim and such withdrawal had been permitted by the resolution professional.  

However, the counsel of the Resolution Professional submits that the decision of the Resolution Professional allowing withdrawal of claim was subsequently set aside by the Adjudicating Authority which directed inclusion of the appellant in the Committee of Creditors and the appellant did actually and factually participate in the meeting of the Committee of Creditors.

After hearing arguments from both sides, the NCLAT said that the direction in terms of the impugned order slapping appellant with liability to bear 27% of the CIRP cost is backed by the documentary evidence besides being in consonance with and proportionate to the share of the Appellant. Therefore, the tribunal said that the contention of same being arbitrary or unreasonable cannot be entertained.

However, the NCLAT observed that the computation of the cost had not taken into consideration the period of exclusion of the appellant from the insolvency process — the period from 5 February 2020 (when its claim was allowed to be withdrawn) to 10 July 2020 (when it was a part of the Committee of Creditors).

The CIRP costs for such period have to be excluded as the Appellant cannot be held in any manner liable to bear the same, said the NCLAT.