NCLT Chandigarh: Financial Creditor Must Bear CIRP Costs if Insolvency Proceedings Are Set Aside

April 9, 2026 : The National Company Law Tribunal (NCLT), Chandigarh Bench, has held that where a corporate insolvency resolution process (CIRP) is set aside and the dispute is subsequently settled, the liability to bear CIRP costs rests on the financial creditor that initiated the proceedings. The Tribunal directed V.I.R. Foods Ltd. to pay ₹30.91 lakh towards outstanding CIRP costs to the Resolution Professional (RP) of White Water Hospitality Private Limited.

The ruling came in an application filed by the RP under Rule 11 of the NCLT Rules, 2016 seeking payment of unpaid CIRP costs, including professional fees and related expenses.

The CIRP had been initiated on November 21, 2019, upon a petition filed by V.I.R. Foods Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016. During the process, the Interim Resolution Professional was appointed and a Committee of Creditors (CoC) was constituted, which approved the RP’s fees and CIRP expenses in multiple meetings. The total CIRP cost was determined at ₹40.95 lakh, of which ₹30.91 lakh remained unpaid.

Subsequently, the National Company Law Appellate Tribunal (NCLAT) set aside the CIRP admission order on August 17, 2023, holding the initiation to be unsustainable in law. The matter reached the Supreme Court, where the corporate debtor agreed to settle dues with the financial creditor, and the limited issue of CIRP costs was remitted back to the NCLT for adjudication.

The core issue before the Tribunal was the allocation of CIRP costs after the insolvency proceedings had been annulled. The Bench comprising Khetrabasi Biswal (Member Judicial) and Shishir Agarwal (Member Technical) emphasised that CIRP costs, including RP fees, are statutorily recognised and cannot be left unpaid merely because the proceedings were later set aside. It observed that the work performed by the RP during the subsistence of the CIRP must be compensated.

On liability, the Tribunal held that once the CIRP admission is set aside and the dispute is resolved, the responsibility to bear costs must follow the party that invoked the insolvency mechanism. Since V.I.R. Foods Ltd. initiated the CIRP—which was ultimately found unsustainable—it could not avoid liability for the costs incurred during the process.

Rejecting the argument that the corporate debtor should bear the costs due to subsequent settlement, the Tribunal held that a party cannot be burdened with expenses arising from a process that was declared illegal. It also declined to impose liability on other CoC members, noting that their participation was incidental and not voluntary initiation of the proceedings.

The Tribunal relied on the Supreme Court’s decision in Rajkumar Brothers and Production Pvt. Ltd. v. Harish Amilineni, which affirms that where insolvency proceedings are found unsustainable, the initiating party must bear the CIRP costs.

Accordingly, the Tribunal allowed the application and directed V.I.R. Foods Ltd. to pay ₹30,91,220 to the Resolution Professional.

Case Title: Madan Gopal Jindal v. V.I.R. Foods Ltd. & Ors.
Case No.: I.A. No. 2162 of 2023 in CP (IB) No. 90/Chd/2018
Coram: Khetrabasi Biswal (Member Judicial) and Shishir Agarwal (Member Technical)