No Scope for Symbolic Possession under IBC: NCLAT Affirms IRP’s Right to Full Control of Corporate Debtor’s Assets
- REEDLAW
- 2 days ago
- 3 min read
REEDLAW Legal News Network reports: In a decisive ruling, the National Company Law Appellate Tribunal (NCLAT), Chennai Bench, clarified that the concept of ‘symbolic possession’ has no place under the Insolvency and Bankruptcy Code, 2016. The Tribunal reaffirmed that once the Corporate Insolvency Resolution Process (CIRP) is initiated under Section 10, the Interim Resolution Professional (IRP) is legally empowered to assume full control and custody of all assets of the Corporate Debtor, ensuring an unhindered and effective management takeover.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swain (Technical Member), while adjudicating a Company Appeal, recently held that the concept of ‘symbolic possession’ has no recognition under the Insolvency and Bankruptcy Code, 2016, and once CIRP is initiated under Section 10, the Interim Resolution Professional is entitled to take full control and custody of all assets of the Corporate Debtor.
The Appellants had challenged an order of the Adjudicating Authority, Chennai Bench, in which the Interim Resolution Professional (IRP) was granted relief directing the Appellants to cooperate in managing the affairs of the Corporate Debtor and to vacate and hand over the premises, inventories, assets, and records to the IRP. The IRP had sought possession of inventories valued at approximately ₹1.02 crore, a cash balance of ₹1.56 lakh, and all related assets and records of the Corporate Debtor. The Tribunal allowed the application, directing full cooperation and transfer of possession to the IRP. Aggrieved by this, the Appellants preferred the present appeal, contending that they should only be required to hand over symbolic possession rather than actual possession of the Corporate Debtor’s assets.
The Appellate Tribunal examined the contention and observed that the concept of “symbolic possession” was alien to the Corporate Insolvency Resolution Process (CIRP) initiated under Section 10 of the Insolvency and Bankruptcy Code, 2016. The Bench noted that the CIRP had commenced based on a voluntary application by the Corporate Debtor itself, which had admitted default in repayment of debt. Upon admission of the application under Section 10, the consequences prescribed under Section 13 followed — including imposition of moratorium, appointment of an Interim Resolution Professional, and making of a public announcement. Under Sections 17 and 18 of the Code, the IRP was mandated to assume management of the affairs of the Corporate Debtor and to take control and custody of its assets.
The Tribunal observed that the Appellants’ argument regarding “symbolic possession” had no statutory foundation and that no provision under the IBC recognised such a concept in the context of CIRP proceedings. The Respondent, representing the IRP, had rightly argued that Section 18(f) explicitly required the IRP to take control and custody of all assets over which the Corporate Debtor had ownership rights, as reflected in its financial records or any statutory registry. Allowing symbolic possession, the Bench held, would undermine the very object of Section 10, which was to enable effective resolution of insolvency by vesting actual control of the Corporate Debtor’s assets and affairs with the IRP.
The Appellate Tribunal found no merit in the appeal and concluded that the Adjudicating Authority’s directions were consistent with the statutory mandate of the Code. It further held that permitting symbolic possession would defeat the purpose of the CIRP and obstruct the IRP’s ability to carry out its duties under law. Accordingly, the appeal was dismissed, and all connected interlocutory applications were closed.
Mr. A.S. Sathish Kumar, Advocate, represented the Appellants.
Mr. Avinash Krishnan Ravi, Advocate, appeared for the Respondent.
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