Summary:
In this case, RP filed an application seeking post-facto approval for the payment of pre-CIRP dues, which were made to avoid work stoppage, termination of contracts, invocation of bank guarantees and to maintain the CD as a going concern.
Hon’ble NCLT Hyderabad Bench held that:
(i) There is no provision under IBC or regulations thereunder which empowers this Authority to ratify the actions of the RP directly without prior approval of the CoC and it is within the domain of the CoC to decide the costs incurred or payments made by the RP during CIRP to keep the CD as a going concern.
(ii) Any payments made by the RP to maintain the CD as a going concern shall be treated as CIRP costs and the same must be decided by the CoC.
Brief Facts of the case
The present application has been filed by the Resolution Professional (RP) of the Corporate Debtor (CD), seeking post-facto approval for the payment of pre-CIRP dues amounting to Rs. 52.88 Crores, which were made to avoid work stoppage, termination of contracts, invocation of bank guarantees and to maintain the CD as a going concern.
Decision of Adjudicating Authority:
Sections 5(13) and 28 of the IBC indicate that this Authority cannot directly approve the RP’s actions without the CoC’s prior approval. It is up to the CoC to decide on the costs incurred or payments made by the RP during CIRP to keep the company operating.
Similar views were expressed by the Hon’ble NCLAT in previous cases, stating that any payments made by the RP to maintain the company as a going concern should be treated as CIRP costs and must be approved by the CoC.
Based on these observations, the Authority directs the Applicant to seek approval from the CoC for the Rs. 52.88 Crores paid by the RP as pre-CIRP dues. The Applicant can file a new application after obtaining the CoC’s approval.
