Tribunal Directs Payment of INR 3.32 Crores as CIRP Cost to Ensure Corporate Debtor Remains a Going Concern
In a significant ruling by the National Company Law Tribunal (NCLT), Principal Bench, New Delhi, the tribunal has directed the release of INR 3.32 crores as Corporate Insolvency Resolution Process (CIRP) costs to M/s Teneron Limited. This decision came in response to multiple applications filed by Teneron, which is engaged in the production and sale of aluminum alloy ingots and products, against the Corporate Debtor, M/s Metenere Limited, which is under insolvency proceedings.
The bench, comprising Chief Justice (Retd.) Ramalingam Sudhakar and Shri Ravindra Chaturvedi, Member (Technical), adjudicated on the matter involving the classification and prioritization of costs incurred during the CIRP. The dispute arose from a job work agreement between Teneron and Metenere, where Teneron supplied raw materials critical for keeping Metenere as a going concern.
Teneron argued that the supply of raw materials and other services provided under the job work agreement qualified as CIRP costs under Section 5(13) of the Insolvency and Bankruptcy Code, 2016, and Regulation 31 of the CIRP Regulations, 2016. The applicant contended that these costs were essential for maintaining the operations of Metenere, thus should be prioritized for repayment.
The tribunal acknowledged that the supply of raw materials by Teneron was vital to the operations of Metenere, and such supply indeed constituted CIRP costs. The bench emphasized the importance of CIRP costs being paid in priority, as mandated by Section 30(2)(a) of the Insolvency and Bankruptcy Code, 2016.
The tribunal ordered the State Bank of India, CGO Complex, New Delhi, to release the funds to the Monitoring Committee, which will then disburse the amount to Teneron without delay. This decision reinforces the principle that payments necessary to keep a Corporate Debtor operational during insolvency proceedings should be prioritized.
However, the tribunal dismissed Teneron's other applications concerning ownership disputes over materials supplied under the job work agreement. Citing precedents, the NCLT clarified that such contractual disputes fall outside its jurisdiction and should be resolved by competent courts.
This judgment underscores the tribunal's commitment to ensuring that insolvency proceedings are conducted efficiently, with critical operational costs being addressed promptly to support the Corporate Debtor's continued functioning.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Claims under job work agreement for CIRP cost - Supply of raw material by applicant to Corporate Debtor was critical to keep Corporate Debtor as a going concern - Such supply constitutes CIRP cost under Section 5(13) read with Regulation 31 of CIRP Regulations, 2016.
Statutory provision(s): Section 5(13), Section 30(2)(a), Section 60(5)(c) of Insolvency and Bankruptcy Code, 2016, Regulation 31 of CIRP Regulations, 2016
