Section 14 of the IBC prevents the payment of any pre-CIRP dues of a creditor during the moratorium period. The moratorium does not affect the payment of dues/costs arising in the course of the CIRP of the CD. These dues/costs are categorized as “insolvency resolution process costs” (CIRP costs), and to the extent unpaid, are to be given priority for payment under the resolution plan (section 30(2)(a)). CIRP costs are defined in section 5(13) of the IBC to mean the following:
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• the amount of any interim finance and the costs incurred in raising such finance;
• the fees payable to any person acting as a resolution professional (this would include both the IRP and RP);
• any costs incurred by the resolution professional (IRP/RP) in running the business of the CD as a going concern;
• any costs incurred at the expense of the government to facilitate the insolvency resolution process; and any other costs as may be specified by the IBBI. As per regulation 31 of the CIRP Regulations, these costs mean the following:
• amounts due to suppliers of essential goods and services under regulation 32;
• the fee payable to the AR under regulation 16A (8);
• out-of-pocket expenses of the AR for discharging his functions under section 25A;
• amounts due to a person whose rights are prejudicially affected by the moratorium imposed under section 14(1)(d);
• expenses incurred on or by the IRP to the extent ratified under regulation 33.
- expenses incurred on or by the RP fixed under regulation 34
• other costs directly relating to CIRP and approved by the CoC.
Where the CD has cash flows or where interim finance has been raised, the CIRP costs can be paid during the CIRP as well. Since CIRP costs include costs incurred in running the business of the CD as a going concern, all regular course payments for liabilities arising during CIRP, such as payments to vendors for supply made during the CIRP or payment of wages and salaries to employees during CIRP period is paid out as CIRP costs during the CIRP. In case the CD does not have funds to make these payments, the resolution plan provides for payment of the same in priority to all creditors. It may be noted that the CIRP costs also get priority in payment (along with liquidation costs) in the distribution waterfall under section 53 (1) of the IBC, in case the CD goes into liquidation.
