Absence Of Disciplinary Proceedings Bars NCLT From Rejecting Proposed IRP Under IBC: Madras High Court

The Division Bench of Madras High Court, comprising Justice Dr. Anita Sumanth and Mr. Justice N. Senthilkumar, has held that in the absence of disciplinary proceedings pending against the professional, NCLT is bound to appoint the IRP proposed by the applicant under sections 7 and 10 of the IBC, 2016. Background of the Case The petition under Article 226 was filed to quash the appointment of Mr. Thangamuthu as the IRP of the corporate debtor. The petitioner is an insolvency professional aggrieved by the NCLT, Chennai order dated 04.06.2025 by which the adjudicating authority appointed Mr. Thangamuthu as the IRP instead of the petitioner. Affected by the impugned order, the petitioner approached the Hon'ble Madras High Court, seeking to quash the impugned order of the adjudicating authority to the extent of appointing a different IRP and to direct appointment of the petitioner as IRP. Contention of the Parties The petitioner contended that section 10(3)(b) of the IBC mandates that the corporate applicant can recommend the name of the proposed IRP, and under section 16, the adjudicating authority is bound to appoint the proposed IRP unless there are any disciplinary proceedings pending against him. Per contra, the respondent countered that the corporate debtor had altered its IRP nomination multiple times, because of which the NCLT appointed the IRP from the IBBI list. The NCLT Registrar has mentioned seven instances where the bench has appointed an IRP other than the one recommended by the section 10 applicant. Observations of the NCLAT The NCLAT observed that when an application under sections 7 or 10 is filed, the NCLT is bound to appoint the IRP proposed by the applicant unless there are any disciplinary proceedings pending against him. In an application u/s 7 or 10, there is no discretion available to the adjudicating authority with regard to the appointment of the IRP. The tribunal discussed that there is no statutory discretion available to the NCLT to reject or substitute the IRP recommended. While discussing the concerns regarding the frequent changes in recommendations, the Hon'ble Court said that the robust mechanism prescribed under section 22 of the IBC empowers the CoC to replace the IRP by a 66% majority vote. The tribunal set aside the impugned order of the NCLT and held the substitution to be permissible. It lastly directed the NCLT to pass the fresh order in accordance with the statutory scheme within six weeks. Case Name: K.J. Vinod v. Registrar, NCLT & Anr.Citation: 2025 LiveLaw (Mad) 296 Case No.: W.P. No. 22949 of 2025 Bench: Hon'ble Justice Dr. Anita Sumanth and Hon'ble Mr. Justice N. Senthilkumar For Petitioner: Mr. Varun Srinivasan Order Date: 13.08.2025 Click Here To Read/Download The Order

Absence Of Disciplinary Proceedings Bars NCLT From Rejecting Proposed IRP Under IBC: Madras High Court

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Absence Of Disciplinary Proceedings Bars NCLT From Rejecting Proposed IRP Under IBC: Madras High Court

Mohd.Rehan Ali

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