Section 19(2) Application Can Be Preferred For Effective Conduct Of CIRP Despite Challenge To Admission Of CIRP: NCLAT

Brief Facts:

M/s. Villmar Agro Polymers Pvt. Ltd. (Corporate Debtor) was admitted to CIRP on 12.04.2023. The case of the Appellant was that the suspended director of Corporate Debtor got to know of CIRP proceedings on 21.04.2023. The Appellant subsequently filed an application with the NCLT to set aside the ex-parte order dated 12.04.2023 since the Appellant was not given an opportunity to be heard, and to recall the said order.

The IRP filed an application under section 19(2) of the IBC, seeking that the suspended directors hand over all of the corporate debtor's assets, properties, books of accounts and other records to facilitate CIRP proceedings. This was allowed by the impugned order dated 17.11.2023. The Appellant challenged the impugned order.

Observations:

The NCLAT dismissed the appeal after finding that CIRP had commenced and moratorium was in effect. It held that the application under section 19(2) was rightly preferred for the purpose of effective conduct of CIRP proceedings. The Tribunal observed that section 60(5) will not have a superseding effect to the provisions contained under section 19(2) read with section 14.

The NCLAT found no merit in the Appellant's Application, as the Corporate Debtor was represented during proceedings, though its counsel failed to file vakalathnama or counter affidavit. The Tribunal upheld the ex-parte order. It dismissed the appeal.

Case Title: M/s. Vilmar Agro Polymers Pvt. Ltd vs. SPC FAB Private Limited Saraswathi Nilayam & Anr.

Case Number: Company Appeal (AT) (CH) (Ins) No. 55/2024

Date of Judgment: 13.11.2024

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