Madras High Court Holds NCLT Bound to Appoint IRP Proposed by Corporate Debtor Under IBC

The Madras High Court held that the NCLT is bound to appoint the Interim Resolution Professional (IRP) as proposed by the Corporate Debtor under the provisions of the Insolvency and Bankruptcy Code (IBC).

The Madras High Court Division Bench comprising Justice Dr. Anita Sumanth and Justice K. Govindarajan Thilakavadi, while adjudicating a batch of writ petitions, held that under Sections 10(3)(b) and 16(2) of the Insolvency and Bankruptcy Code, 2016, it is mandatory for the Adjudicating Authority (NCLT) to appoint the Interim Resolution Professional (IRP) proposed by the corporate debtor, unless disciplinary proceedings are pending against the proposed individual. Any deviation from this statutory requirement, the Court observed, would prima facie exceed the discretion conferred under the Code.

The High Court, while adjudicating the writ petition, examined the issue regarding the appointment of an Interim Resolution Professional (IRP) under the Insolvency and Bankruptcy Code, 2016. The petitioner relied on Sections 10(3)(b) and 16(2) of the Code, which provide that where a corporate debtor initiates the corporate insolvency resolution process, it must propose a resolution professional to be appointed as an IRP, and such proposed person shall be appointed if no disciplinary proceedings are pending.

Upon a conjoint reading of Sections 10(3)(b) and 16(2), the Court observed that in cases where an application is filed either by a financial creditor or the corporate debtor, the Insolvency and Bankruptcy Board of India (IBBI) is bound to appoint the IRP as proposed in the application. The Court further noted that Section 16(3), which allows some discretion to the Board in recommending an IRP, applies only in cases where an operational creditor does not propose a name. Therefore, the statutory scheme appears to mandate acceptance of the IRP proposed by the applicant across all three categories—financial creditor, operational creditor, and corporate debtor.

In the instant case, the National Company Law Tribunal (NCLT) had appointed an IRP different from the one proposed by the corporate debtor. The learned counsel appearing on behalf of the NCLT was directed to obtain instructions and file a detailed counter, specifically addressing instances where the NCLT had appointed IRPs other than those proposed by applicants under Sections 7, 9, or 10 of the Code.

The Court also noted that while Sections 22 and 27 of the Code empower the Committee of Creditors (CoC) to replace the IRP at a later stage, the initial appointment is to be made as per the applicant’s proposal. Thus, prima facie, it appeared that the IBBI and the NCLT were required to follow the applicant’s recommendation, with only the CoC having discretion to subsequently alter the appointment.

The matter was posted for further hearing on 22 July 2025, granting a final opportunity to the respondents to file their counterstatements, with copies to be served in advance on the petitioner.

Mr. Varun Srinivasan, Advocate, represented the Petitioner.

Ms. S. Indumathi Ravi, Advocate, appeared for the Respondent No. 1.

Mr. Girish Ramanathan, Advocate, appeared for Mr. S.A. Vivekanda, Advocate for the Respondent No. 2.

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REEDLAW 2025 Mad 07552