Safiya Malik

The High Court of Judicature at Madras Division Bench of Justice Dr. Anita Sumanth and Justice N. Senthilkumar delivered a judgment directing that the order passed by the National Company Law Tribunal (NCLT) appointing an Interim Resolution Professional (IRP) different from the one proposed by the applicant could not be sustained. The Court held that the NCLT’s action in substituting the proposed IRP with another professional lacked statutory authority and was contrary to the provisions of the Insolvency and Bankruptcy Code, 2016. The Court directed the NCLT to pass appropriate orders afresh within six weeks, strictly in accordance with the statutory scheme and principles of natural justice.

The matter arose when an Insolvency Professional challenged the order of the National Company Law Tribunal dated 04.06.2025, in which the Tribunal had appointed an Interim Resolution Professional other than the one proposed by the applicant under Section 10 of the Insolvency and Bankruptcy Code, 2016. The petitioner, a registered Insolvency Professional with valid authorization, contended that the appointment was arbitrary, in violation of statutory provisions, and contrary to principles of natural justice.

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The petitioner was enrolled as a member of the Insolvency Professional Agency of the Institute of Cost Accountants of India and registered with the Insolvency and Bankruptcy Board of India (IBBI) with a valid Authorization for Assignment valid until 30.06.2026. The corporate debtor in this case, through an application under Section 10 of the Code, had recommended the petitioner as the Interim Resolution Professional, as required under Section 10(3)(b).

However, the NCLT, upon admission of the case, appointed another professional, Mr. Thangamuthu Viswanathan, as the Interim Resolution Professional. This deviation from the recommendation of the corporate debtor prompted the writ petition.

The petitioner argued that under Section 16(2) of the Code, it was mandatory for the NCLT to appoint the resolution professional proposed by the financial creditor or corporate debtor, provided there were no disciplinary proceedings pending against the proposed individual. The petitioner submitted that NCLT’s action was in contravention of statutory provisions and beyond its jurisdiction.

The petitioner stressed that Insolvency Professionals undergo rigorous training and are regulated by the IBBI, which ensures their competence and eligibility. Thus, once a corporate debtor or financial creditor makes a recommendation, the Tribunal must accept it unless disqualified by pending disciplinary proceedings. The petitioner asserted that NCLT had no discretion in this context.

In preliminary hearings, the High Court noted that Sections 10(3)(b) and 16(2) mandated acceptance of the proposed professional when recommended by financial creditors or corporate debtors. The Court also recorded that under Section 16(3), deviation was permissible only when operational creditors filed applications and failed to propose an IRP. The Court therefore sought a detailed response from the NCLT on the rationale for deviating from the applicant’s recommendation.

The Registrar of NCLT subsequently filed a report listing multiple past instances where the Tribunal had deviated from recommendations, including eight cases under Section 7, twelve under Section 9, and seven under Section 10. The justification provided was that the corporate debtor had altered its recommendation multiple times, prompting the Tribunal to appoint an IRP from the IBBI’s recommended list in the interests of stakeholders.

The High Court noted that apart from this justification, no statutory provision authorized such deviation. It examined Section 7, which mandates financial creditors to recommend a resolution professional in their application. Section 7(5) states that the Tribunal may admit the application if the default is established, the application complete, and no disciplinary proceedings are pending against the proposed professional. The Court observed that rejection of the proposed professional was permissible only where disciplinary proceedings were pending.

Similarly, Section 10 mandates corporate applicants to recommend a professional to act as IRP, while Section 9 allows operational creditors to make recommendations but permits NCLT to refer to the IBBI when no such recommendation is made. Section 16(2) expressly provides that for applications filed by financial creditors or corporate debtors, the proposed professional must be appointed as IRP, subject to absence of disciplinary proceedings.

The Court examined the statutory framework, including Section 22, which allows the Committee of Creditors to confirm or replace the IRP by majority vote at its first meeting. This provision, the Court recorded, served as a statutory check against collusion or lack of transparency in appointments.

Based on this statutory analysis, the Court concluded that NCLT had no discretion to substitute the professional recommended under Section 7 or Section 10 with another of its own choice.

The Bench observed in its prima facie order that “A combined reading of Sections 10(3)(b) and 16(2) of the Code indicate that in case of applications filed by Financial Creditor (FC) or Corporate Debtor (CD) seeking ownership, it is incumbent on the National Company Law Tribunal (in short ‘Tribunal’) to appoint an Interim Resolution Professional (IRP) as suggested by the FC or CD as the case may be.”

It further recorded that “To be noted that even Section 16(3) which grants some leeway for the Tribunal to appoint RP as per its discretion, would stand triggered only in the event that the Operational Creditor (OC) does not give a proposal for appointment of a specific IRP. Therefore, it appears prima facie that in all the three cases (FC, OC and CD), suggestions for appointment of IRP by the applicants, are liable to be accepted.”

When NCLT’s Registrar filed the report, the Court noted: “The justification of R1 for not accepting the recommendation of the Petitioner as IRP is that R2 had changed the recommendation of the IRP multiple times. Hence the NCLT thought it fit to itself appoint an IRP from the IBBI recommended list in the larger interests of the stakeholders. One thing is clear, apart from the aforesaid justification, there is no other statutory backing in the NCLT rejecting the recommendation of R2.”

The Bench also recorded: “Hence and in regard to an application under Sections 7 or under 10 of the IB Code, the professional recommended by the applicant must mandatorily be appointed as IRP, the only caveat being that no disciplinary proceedings should be pending as against him. There is no elbowroom available for the NCLT to take a different view in this regard.”

It addressed concerns of unchecked discretion by stating: “Our apprehension in regard to the untrammelled power that this would vest in the parties, lack of transparency in appointments and possible collusion, are assuaged by the availability of robust statutory checks and balances in this regard.”

The Court quoted Section 22, noting that “the Committee of Creditors (CoC) may at the very first meeting, and if they have a majority, either resolve to appoint the IRP as RP or to replace the IRP by another RP.” It reiterated that this scheme provided adequate statutory safeguards.

The Court finally observed: “In light of the aforesaid, the impugned order of the NCLT substituting the IRP proposed by the applicant with an IRP of its own choice, for reasons of its own, cannot be sustained and is set aside. We may suggest that it is always open to the NCLT to record its reservations in regard to the IRP as proposed by the applicant, such that those observations may be part of its order, for consideration of the CoC under Section 22 of the Code.”

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The High Court declared that the impugned order substituting the Interim Resolution Professional could not be sustained and therefore set it aside. It directed that: “Let appropriate orders be passed afresh by the NCLT on the application filed by R2, having regard to the observations set out hereinabove, and in line with the statutory scheme and principles of natural justice, within a period of six (6) weeks from date of receipt of a copy of this order.”

The Court allowed the writ petition in these terms and recorded that “This writ petition is allowed in terms of this order. No costs. Connected miscellaneous petitions are closed.”

It also suggested that while the NCLT was bound to appoint the professional proposed under Section 7 or Section 10, it remained open to the Tribunal to record reservations in its order for consideration by the Committee of Creditors under Section 22.

Advocates Representing the Parties

For the Petitioner: Mr. Varun Srinivasan

For the Respondents: Ms. Indumathi Ravi, Mr. Guru Dhananjay for Mr. S.A. Vivekananda

Case Title: K.J. Vinod v. The Registrar of the National Company Law Tribunal & Others
Neutral Citation: 2025: MHC:1952
Case Number: W.P.No.22949 of 2025
Bench: Justice Dr. Anita Sumanth, Justice N. Senthilkumar