NCLAT Rejects Symbolic Possession, Upholds IRP's Right to Actual Custody of Corporate Debtor's Assets
NCLAT Rejects Symbolic Possession, Upholds IRP's Right to Actual Custody of Corporate Debtor's Assets
Introduction
The National Company Law Appellate Tribunal (NCLAT) Chennai bench has dismissed an appeal filed by two promoters of M/s Orion Water Treatment Private Limited, holding that there is no concept of symbolic possession under the Insolvency and Bankruptcy Code, 2016 (IBC) once Corporate Insolvency Resolution Process (CIRP) is initiated.
Factual Background
The corporate debtor was admitted into insolvency following an application under Section 10 of the IBC. An Interim Resolution Professional (IRP) was appointed, and an Interlocutory Application was filed seeking directions against the promoters to cooperate with the IRP, vacate the premises, and hand over the assets. The NCLT allowed the application, and the promoters challenged the order, seeking a direction to hand over only symbolic possession of the assets.
Issues
- Whether the concept of symbolic possession applies under the IBC after initiation of CIRP?
- Whether the IRP is entitled to take actual possession and custody of the corporate debtor's assets?
Contentions of the Parties
Appellants' Contentions: The promoters argued that they should be directed to hand over only symbolic possession of the assets, rather than actual possession.
Respondent's Contentions: The IRP contended that actual possession of the assets is necessary for the effective management and resolution of the corporate debtor.
Reasoning and Analysis
The bench of Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) rejected the plea for symbolic possession, holding that neither Section 10 nor any other provision of the IBC contemplates symbolic possession of the assets after commencement of CIRP. The tribunal noted that the IRP is legally entitled to take custody and control of all the assets of the corporate debtor under Sections 17 and 18 of the IBC.
Decision
The NCLAT dismissed the appeal, holding that permitting symbolic possession would defeat the purpose of the IBC and delay the insolvency resolution process. The tribunal upheld the NCLT's order directing the promoters to cooperate with the IRP, vacate the premises, and hand over the assets.
Implications
The judgment clarifies that the IRP is entitled to take actual possession and custody of the corporate debtor's assets during CIRP, and that symbolic possession is not contemplated under the IBC.
In this case the appellant was represented by Mr. AS Sathish Kumar, Advocate. Meanwhile the respondent was represented by Mr. Avinash Krishnan Ravi, Advocate.
