Suspended Director’s Writ Dismissed Despite Settlement Claim: Bombay HC Affirms IRP Sole Authority and Remitted Matter to NCLT [Read Order]

In a recent ruling, the Bombay High Court dismissed a writ petition filed by a company director who had been suspended despite his claim of having settled dues with the initiating financial creditor. The Court also upheld the primacy of the Interim Resolution Professional (IRP) as the sole authority empowered to act during the CorporateInsolvency Resolution Process (CIRP) and remitted the matter to the National Company Law Tribunal (NCLT).

The petitions were filed by Vishal Ganpat Shinde, suspended director of the corporate debtor, and M/s. Mohandas Chhataram, the initiating financial creditor, is challenging the NCLT’s refusal to allow withdrawal of CIRP under Section 12-A of the Insolvency and Bankruptcy Code (IBC), 2016.

CIRP was initiated in June 2024 on the financial creditor’s application. A settlement followed, and the Interim Resolution Professional (IRP) moved for withdrawal under Section 12-A, backed by Form FA submitted by the financial creditor. However, Union Bank of India and Solapur District Central Co-operative Bank (SDCCBL), claiming to be financial creditors, opposed the withdrawal through intervention applications.

On 9 September 2025, the NCLT dismissed the withdrawal plea and all supporting applications, citing objections from the majority of creditors.

The appellant, Vishal Ganpat Shinde, the suspended director of Gokul Sugar Industries Ltd., argued that the NCLT’s refusal to allow withdrawal of CIRP was passed in violation of principles of natural justice. He cited Rule 34(4) and Rule 37 of the NCLT Rules, which mandate issuance of notice and service of documents to all concerned parties, including interlocutory applications.

He relied on Glas Trust Company LLC v. Byju Raveendran and Kamal K. Singh v. Union of India, asserting that promoters and suspended directors are entitled to be heard in CIRP withdrawal proceedings. He emphasized that hearing the IRP alone does not satisfy the requirement of natural justice, especially when the IRP was acting on behalf of the financial creditor and not the suspended director.

On the other hand, the respondent strongly opposed the writ petitions, asserting that the NCLT followed the correct procedure under the Insolvency and Bankruptcy Code (IBC), 2016, and their intervention applications were duly served on the IRP, who was heard by the NCLT. This satisfied the principles of natural justice, as the IRP was the correct party to receive notice and represent the corporate debtor.

They stated that the petitioners were misreading Section 61 of the IBC and conflating the right to appeal with the right to be heard at the NCLT stage. Since the Committee of Creditors (CoC) had already been formed, any withdrawal from CIRP would now require 90% approval from CoC members, as per Section 12-A.

After hearing the submission, the division bench of Justice Manish Pitale and Justice Shreeram V. Shirsat held that the NCLT’s order suffered from procedural irregularity and breach of natural justice.

The Court noted that “The petitioner was vitally interested, having paid substantial amounts to settle the dispute. The NCLT could not have passed the impugned order behind his back.”

The court observed that Rule 34(4) and Rule 37 of the NCLT Rules mandate service of notice and application copies to all concerned parties. It found that neither the suspended director nor the financial creditor received such notice.

The High Court set aside the NCLT’s order and remitted the matter for fresh consideration, directing that all parties be duly served and heard.

Accordingly, the Writ Petitions are dismissed. The petitioners are at liberty to take recourse to the remedy of appeal before the NCLAT.

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