NCLAT: No Scope for Symbolic Possession Under IBC — IRP Must Take Full, Actual Control of Corporate Debtor’s Assets
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member), has held that there is no concept of “symbolic possession” under the Insolvency and Bankruptcy Code, 2016 (IBC). Once a Corporate Insolvency Resolution Process (CIRP) is initiated under Section 10 of the IBC, the Interim Resolution Professional (IRP) is legally entitled to take actual possession and custody of all assets of the corporate debtor in accordance with Sections 17 and 18 of the Code. The ruling came while dismissing an appeal filed by the promoters of M/s Orion Water Treatment Private Limited, challenging the order of the National Company Law Tribunal (NCLT), Chennai, directing them to vacate the premises and hand over all assets and records of the corporate debtor to the IRP.
Background
The corporate debtor had filed an application under Section 10 of the IBC seeking voluntary initiation of CIRP. The application was admitted by the NCLT on October 18, 2024, following which an Interim Resolution Professional was appointed. During the process, the IRP filed an interlocutory application [IA(IBC)/913(CHE)/2025] seeking directions against the appellants — the company’s promoters — to cooperate with the IRP, vacate the company premises, and hand over the assets, inventories, and records.
According to the IRP, the assets and inventories of the corporate debtor were valued at ₹1,02,56,821, and there was a cash balance of ₹1,56,382 as per the financial statement for FY 2023–2024. The NCLT allowed the IRP’s application and directed the promoters to extend cooperation and hand over the control and custody of the premises and assets. Aggrieved, the promoters approached the Appellate Tribunal, contending that they should be permitted to hand over only “symbolic possession” instead of actual possession of the company’s assets.
Findings of the NCLAT
At the outset, the Bench rejected the contention of the appellants, observing that the IBC contains no provision recognising symbolic possession once CIRP has commenced. The Tribunal emphasised that Section 10, which governs voluntary initiation of insolvency by a corporate debtor, envisages complete transfer of management and control of the debtor’s assets to the IRP.
Referring to Sections 17 and 18 of the IBC, the Tribunal observed that upon initiation of CIRP, “the management of the corporate debtor vests in the IRP,” and it becomes the IRP’s statutory responsibility to take control and custody of all assets belonging to the corporate debtor. This includes all movable and immovable properties over which the debtor holds ownership rights, as reflected in its balance sheets, information utility, or any other relevant registry.
The Bench further noted that once CIRP commences, the corporate debtor ceases to have any authority over its assets, and any attempt to retain possession would defeat the object and purpose of the IBC. “If symbolic possession of the assets is permitted,” the Tribunal held, “it would deceive the very purpose of initiation of CIRP, which aims at resolving the insolvency of the corporate debtor that has committed default.”
Finding no legal or factual error in the NCLT’s order, the Appellate Tribunal upheld the direction requiring the promoters to hand over actual possession of the corporate debtor’s assets to the IRP. The Bench concluded that the plea for symbolic possession was alien to the IBC framework and therefore unsustainable in law. Accordingly, the appeal was dismissed, and all interlocutory applications were closed.
Appearance
For Appellants: Mr. AS Sathish Kumar, Advocate
For Respondent: Mr. Avinash Krishnan Ravi, Advocate
Cause Title: Mr. M. Bhaskaran. V Mr. Sandeep Kothari
Case No: Company Appeal (AT) (CH) (Ins) No. 402/2025
Coram: Justice Sharad Kumar Sharma (Judicial Member), Jatindranath Swain (Technical Member)
