Case Note & Summary
The National Company Law Appellate Tribunal (NCLAT) was hearing an interim application (I.A. No. 8910 of 2024) filed by the appellant, Sanjay Chandrakant Jagtap, in an appeal against the Corporate Insolvency Resolution Process (CIRP) of a corporate debtor. The appellant sought permission for an ex-employee, Mr. Sachin Kunjir, to manage the business and banking operations of the corporate debtor, and also sought the immediate removal of the Interim Resolution Professional (IRP), Mr. Rattan Chaudhry, on the ground that the IRP had been suspended by the Insolvency and Bankruptcy Board of India (IBBI) on 22.10.2024. The appellant also prayed for a direction to the IRP to explain non-disclosure of the IBBI order. The appellant's counsel argued that the business of the corporate debtor was drying up and that the appellant had obtained a One-Time Settlement (OTS) letter from the State Bank of India dated 30.09.2024, which needed to be complied with by pooling all resources. The appellant had also informed an investor to comply with the OTS. The NCLAT observed that since CIRP had commenced and an IRP had been appointed, no permission could be granted to an ex-employee or key managerial person to operate the bank accounts of the corporate debtor. The IRP is the sole authority to manage the affairs during CIRP. Regarding the removal of the IRP, the NCLAT noted that the IRP had already been suspended by IBBI on 22.10.2024, and the appeal was already fixed for hearing on 21.01.2025. Accordingly, the NCLAT dismissed the interim application, finding no merit in the prayers.
Headnote
A) Insolvency and Bankruptcy Code - Corporate Insolvency Resolution Process - Moratorium - Section 14, IBC, 2016 - Once CIRP commences and IRP is appointed, no permission can be granted to ex-management or employees to operate bank accounts of the corporate debtor - The IRP is the sole authority to manage the affairs of the corporate debtor during CIRP (Para 4). B) Insolvency and Bankruptcy Code - Interim Resolution Professional - Removal - Section 16, IBC, 2016 - The application for removal of IRP was not pressed as the IRP had already been suspended by IBBI on 22.10.2024 - The appeal was fixed for hearing on 21.01.2025 (Paras 3-4).
Issue of Consideration
Whether an ex-employee/key managerial person can be permitted to operate bank accounts of the corporate debtor during CIRP, and whether the IRP should be removed.
Final Decision
The NCLAT dismissed the interim application (I.A. No. 8910 of 2024) holding that no permission can be granted to ex-employee/key managerial person to operate bank accounts during CIRP, and noting that the IRP had already been suspended by IBBI.
Law Points
- CIRP
- moratorium
- IRP powers
- ex-management
- bank operations
- OTS
