Madras High Court.
NCLT is Bound to Appoint IRPs appointed by Corporate Debtors: Madras High Court: Chennai, India – In a significant ruling that clarifies the appointment process of Interim Resolution Professionals (IRPs) under the Insolvency and Bankruptcy Code (IBC), the Madras High Court on Monday declared that the National Company Law Tribunal (NCLT) is largely bound to appoint the IRP suggested by the corporate debtor or financial creditor. The decision, delivered while hearing a writ petition challenging an NCLT appointment, underscores the primacy of the applicant’s proposal in insolvency proceedings.
The bench, comprising Hon’ble Dr. Justice Anita Sumanth and Hon’ble Mrs. Justice Govindarajan Thilakavadi, meticulously interpreted Sections 10 and 16 of the Insolvency and Bankruptcy Code, 2016. The core of the dispute arose from an NCLT Chennai decision that deviated from the IRP name proposed by a corporate debtor in their application.
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The High Court emphasized that a combined reading of Sections 10(3)(b) and 16(2) of the IBC makes it clear that the Insolvency and Bankruptcy Board of India (IBBI) is obligated to accept the name suggested by either the financial creditor or the corporate debtor when they file for insolvency. This interpretation suggests a limited discretion for the IBBI in such cases, ensuring that the applicant’s choice is respected.
The court further clarified that the discretion granted to the IBBI under Section 16(3) of the IBC, which allows the Board to appoint an IRP at its discretion, is specifically triggered only when an application is filed by an operational creditor and no name is proposed by them. This distinction highlights the varying degrees of autonomy afforded to different types of creditors and debtors in the pre-appointment phase of insolvency.
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NCLT.
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The case that brought this matter before the High Court involved Annie Traders Pvt. Ltd., which had filed a Section 10 IBC petition before the NCLT and proposed Mr. K.J. Vinod as the IRP. However, the Adjudicating Authority, the NCLT, appointed Mr. Thangamuthu Viswanathan instead. Aggrieved by this decision, Mr. Vinod, an Insolvency Professional, approached the High Court seeking to quash the NCLT’s order partially.
In its observations, the High Court also noted that the power to replace an IRP rests solely with the Committee of Creditors (CoC) and that the NCLT cannot unilaterally replace the IRP at the initial stages of the insolvency resolution process.
Following its ruling, the court instructed the counsel representing the NCLT to file a detailed counter affidavit. This affidavit is expected to clarify the circumstances and instances where the NCLT has previously appointed an IRP different from the one proposed by the corporate debtor, providing further insights into the Tribunal’s past practices.
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This judgment is expected to bring greater clarity and consistency to the appointment of IRPs, particularly in corporate debtor-initiated insolvency proceedings, reinforcing the applicant’s prerogative in proposing the resolution professional.
Case Title: K.J. Vinod (Insolvency Professional) v. Registrar, National Company Law Tribunal, Chennai & Ors.
Case Number: W.P. No. 22949 of 2025 with W.M.P. Nos. 25783 & 25784 of 2025
For Petitioner: Mr. Varun Srinivasan
For Respondent: Ms. S. Indumathi for R1, Mr. Girish Ramanathan for R2
Bench: Hon’ble Dr. Justice Anita Sumanth and Hon’ble Mrs. Justice Govindarajan Thilakavadi
Judgment Date: 07/08/2025.
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