Resolution Professional Cannot Seek Removal Of Statutory Lien Created Before CIRP: NCLT Mumbai

On February 13, a bench comprising Judicial Member Mohan Prasad Tiwari and Technical Member Charanjeet Singh Gulati held that a statutory lien validly created before initiation of CIRP cannot be nullified merely because insolvency proceedings have commenced.

“As regards the duties of the Resolution Professional under Section 25 of the Code, the provision mandates the Resolution Professional to preserve and protect the assets of the Corporate Debtor and to take custody and control thereof.”

The tribunal added, “However, the said provision does not confer any specific authority upon the Resolution Professional to seek removal of statutory attachments or liens lawfully created prior to commencement of CIRP, nor does it envisage enhancement or alteration of pre-existing rights created under other statutes.”

Vemb Lifestyle Pvt Ltd had been admitted into CIRP on February 27, 2024. However, much prior to that, the income tax department had issued attachment directions in October and November 2019 under the Income Tax Act, marking a lien of approximately Rs. 4.01 crore on the company's accounts maintained with a bank.

The applicant contended that the continued subsistence of the lien during moratorium impeded the insolvency process and that the funds ought to be transferred to the designated CIRP account.

Rejecting the contention, the tribunal observed that the moratorium prohibits initiation or continuation of fresh proceedings but does not invalidate attachments lawfully created before commencement of CIRP.

It further clarified that the duty to preserve and protect assets does not empower the resolution professional to seek removal of “statutory attachments or liens” created under other laws.

Finding no inconsistency warranting invocation of the overriding clause, the tribunal dismissed the application.

For Applicant: Advocate Adv. Aniruth Purushothaman G (PH)

For Respondent: None