Suspended Directors Cannot Operate Company Bank Accounts After CIRP Admission: NCLT Amaravati

The National Company Law Tribunal (NCLT) at Amaravati has held that once a corporate debtor is admitted into the Corporate Insolvency Resolution Process (CIRP), its suspended management has no authority to operate the company's bank accounts or transfer its funds.

A coram of Judicial Member Kishore Vemulapalli and Technical Member Umesh Kumar Shukla observed that any operation of the company's bank account or transfer of funds without the Interim Resolution Professional's (IRP) authorisation violates Sections 14 and 17 of the Insolvency and Bankruptcy Code, 2016.

"Upon admission of the Corporate Debtor into CIRP, the management of the affairs of the Corporate Debtor vested exclusively with the IRP under Section 17 of the Code and the powers of the Board of Directors stood suspended. Consequently, any operation of the bank account or transfer of funds by the Suspended Board without the authorization of the IRP constitutes a clear violation of Sections 14 and 17 of the Code.", the court ruled.

Allowing an application filed by the IRP under Sections 14 and 17 of the Code, the bench directed the suspended director of Suvarnabhoomi Infra Developers Private Limited to restore ₹63.92 lakh to the designated CIRP account of the corporate debtor. The amount has to be restored within two weeks.

The company was admitted into CIRP on January 20, 2026. From that date, management of its affairs vested in the IRP under Section 17 of the Code, and the powers of its Board of Directors stood suspended.

The IRP said the suspended director was informed about the admission order and the moratorium through emails, WhatsApp messages, telephone calls, and personal service. Despite this, he continued operating the company's ICICI Bank account. Transactions totalling ₹63.92 lakh were carried out from the account after the commencement of CIRP.

After reviewing the bank statements, the IRP found that the transfers had been made after the commencement of CIRP. He then asked the suspended director to reverse the transactions and restore the money to the designated CIRP account. As the amount was not returned, the IRP moved the tribunal.

The suspended director argued that the IRP had failed to establish any fraudulent intent behind the transfers. He also maintained that if any recovery was to be made, it should be from the beneficiaries of the transactions and not from him.

The bench rejected these arguments. It ruled that once CIRP begins, management of the corporate debtor vests exclusively in the IRP. The suspended management has no authority to operate the company's bank accounts thereafter.

The bench also relied on Anoop Bhatia v. Vikas Jeph, a ruling that was later upheld by the National Company Law Appellate Tribunal (NCLAT). Following that precedent, it directed the suspended director to restore ₹63.92 lakh to the designated CIRP account within two weeks.