NCLT Mumbai Holds Water Supply And Service Charges To RIICO Not CIRP Costs

The National Company Law Tribunal (NCLT) at Mumbai on 5 May held that water supply charges and industrial service/maintenance charges payable to Rajasthan State Industrial Development & Investment Corporation Ltd. (RIICO) do not qualify as Corporate Insolvency Resolution Process (CIRP) costs under the Insolvency and Bankruptcy Code, 2016.

Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar partly allowed RIICO's application seeking payment of dues from Shrivallabh Pittie Industries Ltd., but declined to treat the claimed charges as CIRP costs. They observed:

“Hence, in terms of the said regulations as further exemplified by the illustration, the water supply to the corporate debtor under the said water supply agreement does not constitute an essential supply. Thus, the dues arising under water supply agreement are not covered under Regulation 32(a) of CIRP Regulations, thereby, such dues do not fall within the definition of Insolvency Resolution Process costs as contained under section 5(13) of the IBC.”

The Corporate Insolvency Resolution Process against Shrivallabh Pittie Industries, a textile and cotton yarn manufacturing company, commenced on 7 March 2024 pursuant to a petition filed by State Bank of India.

RIICO claimed that dues towards service charges, water supply charges, and interest from 7 March 2024 to 31 May 2025 remained unpaid, amounting to about Rs 2.29 crore. It relied on a lease deed dated 20 April 2015 and a water supply agreement dated 18 April 2016, under which the corporate debtor had agreed to pay minimum guaranteed water charges irrespective of actual consumption.

The corporation argued that water supply and maintenance of industrial infrastructure, including sanitation and upkeep of the industrial area, were necessary for preserving the corporate debtor as a going concern, and therefore constituted CIRP costs.

The Resolution Professional opposed the claim, stating that the manufacturing unit had remained non-operational since 2022–23 and that water supply was not required for running the company as a going concern during CIRP.

On service charges, the Tribunal held that general maintenance obligations of the industrial estate could not automatically be treated as CIRP costs. It observed:

“Simply because, there was an obligation to pay for general maintenance and up-keep of industrial estate, in which the corporate debtor was allotted a plot, it can not be said that the such costs shall become corporate insolvency resolution process costs.”

The Tribunal further held that although contractual liability under the agreements continued, such dues could not be elevated to CIRP costs merely due to their contractual nature or association with industrial infrastructure.

Accordingly, the NCLT directed the Resolution Professional to verify and make provision for admissible water and service charge dues for the period from 7 March 2024 till 8 November 2024, while clarifying that such amounts would not form part of CIRP costs.