Case Note & Summary
The present appeal was filed by Mr. M. Bhaskaran and Mr. M. Radhakrishnan, who were the opposite parties in IA(IBC)/913(CHE)/2025 before the National Company Law Tribunal (NCLT), Chennai. The said IA was filed by the Interim Resolution Professional (IRP), Mr. Sandeep Kothari, in the Corporate Insolvency Resolution Process (CIRP) of M/s. Orion Water Treatment Private Limited, which was initiated under Section 10 of the Insolvency and Bankruptcy Code, 2016 (IBC). The IRP sought directions against the Appellants to cooperate in managing the affairs of the Corporate Debtor and to vacate and hand over the control and custody of the premises of the Corporate Debtor to the IRP or his authorised representative. Additionally, the IRP sought possession of inventories valued at approximately Rs.1,02,56,821/- and the cash balance. The NCLT allowed the IA and directed the Appellants to cooperate and hand over possession. Aggrieved, the Appellants filed the present appeal before the National Company Law Appellate Tribunal (NCLAT), Chennai. The NCLAT, after hearing the parties, dismissed the appeal, holding that the Appellants, being the erstwhile directors, are bound to cooperate with the IRP and hand over the premises and assets. The NCLAT observed that the order of the NCLT was just and proper and did not warrant any interference. The appeal was accordingly dismissed.
Headnote
A) Insolvency Law - Corporate Insolvency Resolution Process - Cooperation of Corporate Debtor - Section 10, Section 19 of Insolvency and Bankruptcy Code, 2016 - The Appellants, being the erstwhile directors of the Corporate Debtor, were directed by the NCLT to cooperate with the IRP and hand over possession of the premises and assets. The NCLAT upheld the order, holding that the directors are bound to cooperate and failure to do so obstructs the CIRP. (Paras 1-6)
B) Insolvency Law - Interim Resolution Professional - Possession of Assets - Section 18, Section 19 of Insolvency and Bankruptcy Code, 2016 - The IRP sought possession of inventories valued at Rs.1,02,56,821/- and cash balance. The NCLAT held that the IRP is entitled to take custody and control of the Corporate Debtor's assets, and the directors must hand over the same. (Paras 2-5)
Issue of Consideration
Whether the Appellants (former directors) are obliged to cooperate with the Interim Resolution Professional and hand over possession of the Corporate Debtor's premises and assets during the Corporate Insolvency Resolution Process.
Final Decision
The appeal is dismissed. The order of the NCLT is upheld. The Appellants are directed to cooperate with the IRP and hand over possession of the premises and assets of the Corporate Debtor.
Law Points
- Corporate Insolvency Resolution Process
- Cooperation of Corporate Debtor's management
- Handing over possession to IRP
- Section 10 IBC
- Section 19 IBC
Case Details
2024 LawText (NCLAT) (01) 48
Company Appeal (AT) (CH) (Ins) No. 402/2025
Justice Sharad Kumar Sharma (Member Judicial)
Mr. AS Sathish Kumar (for Appellants), Mr. Avinash Krishnan Ravi (for Respondent)
Mr. M. Bhaskaran and Mr. M. Radhakrishnan
Mr. Sandeep Kothari, Interim Resolution Professional of Orion Water Treatment Private Limited
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Nature of Litigation
Appeal against order of NCLT directing former directors to cooperate with IRP and hand over possession of Corporate Debtor's premises and assets.
Remedy Sought
Appellants sought setting aside of NCLT order directing them to cooperate and hand over possession.
Filing Reason
Appellants were aggrieved by the NCLT order directing them to cooperate with the IRP and hand over possession of the Corporate Debtor's premises and assets.
Previous Decisions
NCLT Chennai allowed IA(IBC)/913(CHE)/2025 in CP(IB)/263(CHE)/2022, directing the Appellants to cooperate and hand over possession.
Issues
Whether the Appellants are obliged to cooperate with the IRP and hand over possession of the Corporate Debtor's premises and assets during CIRP.
Submissions/Arguments
Appellants argued against the NCLT order.
Respondent IRP sought cooperation and possession.
Ratio Decidendi
The erstwhile directors of a Corporate Debtor are bound to cooperate with the Interim Resolution Professional and hand over possession of the premises and assets during the Corporate Insolvency Resolution Process. Failure to do so obstructs the CIRP and is not permissible under the IBC.
Judgment Excerpts
The Appellant herein are the opposite parties to the proceedings of IA(IBC)/913(CHE)/2025, as it was preferred in CP(IB)/263(CHE)/2022; before Learned NCLT, Chennai, in which CIRP Proceedings had been initiated in the matters of M/s. Orion Water Treatment Private Limited, being the proceedings which were being carried under Section 10 of the I & B Code.
In the application, thus preferred by the Respondent herein, i.e., the Interim Resolution Professional (IRP), relief as prayed for was to the effect that the Respondents to the IA, the Appellant herein may be directed to extend cooperation in managing the affairs of the Corporate Debtor and simultaneously, to vacate and hand over the control and custody of the premises of the Corporate Debtor to the IRP / Applicant or his authorised representative.
Besides that, the IRP sought for possession of the inventories valuing about Rs.1,02,56,821/-, and the cash balance.
Procedural History
The Respondent IRP filed IA(IBC)/913(CHE)/2025 before NCLT Chennai in CP(IB)/263(CHE)/2022 seeking directions against the Appellants to cooperate and hand over possession. NCLT allowed the IA. Appellants filed the present appeal before NCLAT Chennai. NCLAT dismissed the appeal.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: 10, 18, 19
