RP cannot be directed to hand over Charge of CD to Ex-Management when CIRP is stayed: NCLAT [Read Order]
RP cannot be Directed to Hand Over Charge of CD to Ex-Management when CIRP is stayed, rules NCLAT
RP – CD – Ex-Management – CIRP – NCLAT – RP cannot be Directed to Hand Over Charge of CD to Ex-Management – taxscan
RP – CD – Ex-Management – CIRP – NCLAT – RP cannot be Directed to Hand Over Charge of CD to Ex-Management – taxscan
The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) ruled that the Resolution Professional (RP) cannot be directed to hand over charge of Corporate Debtor (CD) to Ex-Management when the Corporate Insolvency Resolution Process (CIRP) is stayed.
The counsel for the appellant submitted that the Respondent No.1 is wrongly claiming that he is entitled to continue as Executive Editor of the Corporate Debtor and receive salaries whereas the Corporate Debtor is running in losses and it is the Resolution Professional who is running the Corporate Debtor for day-to-day function and it is for the Resolution Professional to take a decision regarding continuance of staff of the Corporate Debtor and to engage any staff during currency of CIRP.
The Counsel who appeared for the Respondent No.1 refuted the submissions of the Appellant and submitted that the mere fact that the Supreme Court has stayed the CIRP does not denude the Adjudicating Authority from exercising jurisdiction with all other matters which arise during CIRP. It was submitted that the Respondent No.1 has not challenged the order dated 31.01.2023 in Civil Appeal.
A Two-Member Bench comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Member (Technical) observed that “r. Any such result of stay of the CIRP shall be disastrous since if the management against whom the CIRP has been initiated is handed over the charge, it is prone to misuse the assets and the assets shall be diminished, which may adversely affect the creditors of the Corporate Debtor. In view of the stay of the CIRP, it is true that the Resolution Professional cannot take any further steps in the CIRP of the Corporate Debtor and has to stay his hand from proceeding any further in the CIRP and await the order of the Appellate Court.”
“It is for the Resolution Professional to take decision in its wisdom as to how the Corporate Debtor should be allowed to continue as a going concern without taking any steps in the CIRP, in view of the interim order passed by the Supreme Court dated 25.02.2022. Respondent No.1 virtually seeks his reinstatement of the post which is clear from the prayer made in IA No.4138-4139 of 2023 which has not been entertained in this Appeal and the Adjudicating Authority also ought to have stayed his hands from passing any order on the application filed by the parties which relates to CIRP of the Corporate Debtor.”
To Read the full text of the Order CLICK HERE
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