SIDBI cannot take Possession of Corporate Debtor's Assets Which are not Subject Matter of Litigation: NCLT

SIDBI cannot take Possession of Corporate Debtor's Assets Which are not Subject Matter of Litigation: NCLT

The Resolution Professional stated that the respondents had wrongly taken possession of two vehicles

The Chandigarh bench of the National Company Law Tribunal (NCLT) has held that the Small Industries Development Bank of India (SIDBI), the financial creditor cannot take possession of the corporate debtor's assets, which are not the subject matter of litigation to facilitate the Corporate Insolvency Resolution Process (CIRP).

The application was filed by Resolution Professional (RP) seeking direction against the respondent to pay a car rental of Rs.15,000 per month/per car or part thereof, up to the date of delivery of the vehicles to the applicant for personal purpose use.

It further directed the respondent to hand over the custody of the cars belonging to the corporate debtor to the RP under the provisions of the Insolvency and Bankruptcy Code (IBC), 2016.

The RP stated that the respondents were the suspended directors of the suspended Board of Directors of the corporate debtor. The cars, Toyota Innova and Ssangyong Rexton, registered in the name of the corporate debtor, were in the possession of the respondents. But despite repeated requests, they were not returning the vehicles.

The bench comprising Harnam Singh Thakur (judicial member) and Subrata Kumar Dash (technical member) observed that under IBC, the RP was mandated to take possession and preserve and protect the assets of the corporate debtor. Thus, the two vehicles should have been in his custody immediately after the initiation of the CIRP.

The tribunal held that only those properties on which the corporate debtor must "exercise rights in judicial and quasi-judicial proceedings", the RP could not bring a claim before the NCLT. But in the present case, there was no dispute over the ownership of the vehicles.

Thus, while allowing the application, NCLT directed the respondent to hand over the possession of the vehicles to the RP within 15 days.