NCLAT Rules, Hire Charges Cannot Be Calculated In CIRP Costs When Asset Is Not Used by Corporate Debtor
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has held that hire charges for cranes that were not in use by the corporate debtor during the Corporate Insolvency Resolution Process (CIRP) cannot be treated as insolvency resolution process costs under Regulation 31(b) of the IBBI (CIRP) Regulations, 2016. The Tribunal emphasized that costs can be treated as CIRP costs only when goods or services are actually used by the resolution professional or with the approval of the Committee of Creditors (CoC).
The order was passed by a Bench comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member) in the appeal filed by Starlog Enterprises Ltd. challenging the order of the Adjudicating Authority (NCLT Mumbai, Court-I) dated 25.03.2025 in I.A. No. 5247 of 2024.
Background
The CIRP of Vadraj Cement Ltd. commenced on 02.02.2024. The appellant, Starlog Enterprises Ltd., claimed that its cranes were in the possession of the corporate debtor and sought inclusion of hire charges as CIRP costs. The appellant had raised invoices up to June 2018, after which no further invoices were raised. During the intervening period, winding-up proceedings against the corporate debtor had already commenced in 2017–18, and the cranes were in the possession of the Official Liquidator. After the initiation of CIRP in 2024, the appellant filed its claim before the resolution professional.
According to the appellant, the resolution professional neither returned the cranes nor responded to their claim initially. A partial claim was admitted on 31.07.2024. The RP informed the appellant only on 27.11.2024 that the cranes could be taken back. Joint inspection was conducted and a few cranes were returned, but the process was still ongoing. The appellant filed I.A. No. 5247 of 2024 seeking (a) admission of ₹2.54 crore in addition to ₹6.21 crore already admitted, (b) inclusion of ₹14.50 lakh per month as CIRP costs from 02.02.2024 onwards, and (c) return of the remaining cranes.
Contentions
The appellant argued that due to the moratorium imposed under Section 14(1)(d) of the IBC, they were prevented from retrieving their cranes and hence their rights were prejudicially affected. Relying on Regulation 31(b) of the CIRP Regulations, they asserted that the hire charges from the commencement of CIRP until the cranes' return should be treated as CIRP costs.
The respondent, representing the resolution professional, refuted the appellant’s claim, stating that the cranes were never used during CIRP since the plants at Surat and Kutch were not operational. It was submitted that no invoices were raised after June 2018 and that the corporate debtor was not a going concern. The RP had already invited the appellant to collect its equipment, and the return process was underway.
NCLAT’s Observations
The Tribunal took note of several findings from the Adjudicating Authority’s order, including the fact that no hire invoices were raised after June 2018. The Tribunal agreed with the NCLT’s observation that since the plants had not been operational and CIRP started only in 2024, the cranes were not used by the corporate debtor.
The Tribunal emphasized that Regulation 31(b) applies only where rights are prejudicially affected on account of moratorium. However, in this case, the cranes had already remained unused for over five years and no payments or usage were recorded during that time. The Tribunal clarified: “We are of the view that mere fact that moratorium commenced after 02.02.2024, Appellant’s rights cannot be said to be prejudicially affected by moratorium. Thus, the submission of the Appellant that under Regulation 31(b), the hire charges should be treated as CIRP costs cannot be accepted.”
Further, the Bench highlighted that CIRP costs under Regulation 31 include only those expenses incurred for goods or services actually used during CIRP, and such use must be authorised by the Resolution Professional or CoC. Since the cranes were not used at all during CIRP and there was no evidence of any direction from RP or CoC to retain or use the cranes, the Tribunal rejected the claim. It also noted that the claim for hire charges, in the absence of usage or a valid subsisting contract, essentially becomes a claim for damages, which the Tribunal cannot adjudicate under the IBC.
Verdict
The NCLAT upheld the decision of the Adjudicating Authority rejecting the claim of the appellant for inclusion of crane hire charges as CIRP costs under Regulation 31(b) of the CIRP Regulations. It held that since the cranes were not used by the corporate debtor during CIRP and the corporate debtor was not a going concern, no such costs were admissible. The Tribunal directed that the process of returning the cranes to the appellant, which was already underway, be completed expeditiously. Accordingly, the appeal was dismissed.
Appearance
For Appellant: Mr. Kshitij Sharda, Mr. Shubhanker Sharda, Advocates.
For Respondent: Mr. Viraj Parekh, Mr. Navneet R, Ms. Alankrita Sinha, Advocates for R1.
Cause Title: Starlog Enterprises Ltd. V. Pulkit Gupta
Case No: Company Appeal (AT) (Insolvency) No. 558 of 2025
Coram: Justice Ashok Bhushan [Chairperson] , Mr. Arun Baroka [Member (Technical)], Mr. Barun Mitra [Member (Technical)]
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