NCLAT Chennai Upholds Tribunal's Decision for Actual Asset Possession in CIRP
Symbolic possession rejected; emphasizes adherence to Insolvency and Bankruptcy Code provisions
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) Chennai has dismissed the appeal of Mr. M. Bhaskaran and others, affirming the necessity of handing over actual possession of assets in Corporate Insolvency Resolution Process (CIRP) proceedings. The appeal challenged the decision of the National Company Law Tribunal (NCLT) Chennai, which mandated the transfer of actual possession of the Corporate Debtor's assets to the Interim Resolution Professional (IRP), Mr. Sandeep Kothari.
The appellants sought permission to transfer symbolic possession instead, arguing that it should suffice under the Insolvency and Bankruptcy Code (I&B Code), 2016. However, the NCLAT bench, comprising Justice Sharad Kumar Sharma and Member (Technical) Jatindranath Swain, upheld the NCLT's decision, emphasizing that symbolic possession is not recognized under the provisions of the I&B Code.
The case revolves around M/s. Orion Water Treatment Private Limited, the Corporate Debtor, which had initiated CIRP under Section 10 of the I&B Code due to default in debt payments. The Tribunal's order required the appellants to cooperate with the IRP by vacating the premises and transferring control and custody of the Corporate Debtor's assets, including inventories and cash balances.
The NCLAT clarified that Section 18(f) of the I&B Code mandates the IRP to take control and custody of all assets over which the Corporate Debtor holds ownership rights. The concept of symbolic possession was deemed contrary to the Code's provisions, which aim to facilitate effective resolution processes by ensuring actual possession.
The appellants failed to substantiate their argument for symbolic possession, as the bench noted the absence of any legal basis for such a claim under the CIRP proceedings initiated voluntarily by the Corporate Debtor itself. The Tribunal's decision aligns with the Code's objectives, ensuring the IRP can manage the Corporate Debtor's affairs effectively and resolve insolvency issues.
The ruling underscores the importance of adhering to statutory requirements in CIRP proceedings, preventing any deviations that could hinder resolution efforts. The appeal's dismissal reinforces the IRP's authority to take actual possession, ensuring compliance with the I&B Code's framework.
As the NCLAT emphasized, granting symbolic possession would defeat the purpose of CIRP, aimed at resolving insolvency and restoring financial stability. This decision marks a pivotal moment in reinforcing the I&B Code's integrity and the procedural rigor necessary for effective insolvency resolution.
Bottom Line:
Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code (I & B Code) mandates handing over of actual possession of assets by the Corporate Debtor to the Interim Resolution Professional (IRP) - Symbolic possession is not recognized under CIRP proceedings.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016, Sections 10, 13, 18
Mr. M. Bhaskaran v. Mr. Sandeep Kothari, (NCLAT)(Chennai) : Law Finder Doc Id # 2781267
