After CIRP Begins, IRP Represents Corporate Debtor; Bombay HC Dismisses Suspended Director's Writ Over NCLT Order

The Bombay High Court on Thursday dismissed writ petitions filed by a suspended director of Gokul Sugar Industries Ltd and a financial creditor challenging an order of the National Company Law Tribunal refusing withdrawal of insolvency proceedings. The court held that after commencement of the corporate insolvency resolution process, the corporate debtor is represented by the interim resolution professional and not by the suspended management.

The court held that no violation of principles of natural justice was made out, noting that the interim resolution professional, who represents the corporate debtor after commencement of CIRP, was heard before the NCLT along with the objecting financial creditors, and therefore no ground was made out to invoke writ jurisdiction in the presence of the statutory remedy before the National Company Law Appellate Tribunal.

A division bench of Justices Manish Pitale and Shreeram V. Shirsat held that writ jurisdiction could not be invoked when an alternative remedy was available and the only ground raised was alleged breach of natural justice. The court observed:

“In view of the above, we are of the opinion that since the petitioners have failed to make out their case of violation of principles of natural justice, the writ petitions cannot be entertained in the face of alternative remedy of approaching the NCLAT being available with the petitioners.”

The court said that once CIRP begins, the management of the corporate debtor vests in the interim resolution professional, and the suspended directors cannot independently seek withdrawal of the proceedings. Referring to the scheme of the Insolvency and Bankruptcy Code, the bench observed:

“Upon appointment, only the IRP has the authority to take necessary steps in the context of the corporate debtor, including filing of application for withdrawal under the aforesaid provisions of the IBC and IBC Regulations. In the present case when the application for withdrawal was moved under Section 12-A of the IBC, since the CoC was yet to be constituted, as per the Regulation 30-A(1)(a) of the Regulations, the said application could be moved only through the IRP. The petitioner – financial creditor could never have moved such an application on its own, on the basis of the purported settlement with the petitioner – suspended director of the corporate debtor. Equally, even the petitioner – suspended director could not have independently moved any such application for withdrawal before the NCLT.”

The insolvency proceedings against Gokul Sugar Industries Ltd were admitted on June 27, 2024 on a petition filed by financial creditor Mohandas Chhataram. During the pendency of the proceedings, the suspended director claimed to have settled the dispute with the financial creditor, and the National Company Law Appellate Tribunal on January 24, 2025 granted liberty to file an application for withdrawal under Section 12A of the Code.

The financial creditor submitted Form FA seeking withdrawal, after which the interim resolution professional filed an application under Section 12A before the NCLT. Secured creditors, including Union Bank of India and Solapur District Central Co-operative Bank opposed the withdrawal, stating that substantial dues were payable to them. On September 9, 2025, the NCLT allowed their intervention applications and refused to permit withdrawal of the insolvency proceedings.

Before the High Court, the petitioners contended that the NCLT had passed the order without hearing them and without serving copies of the intervention applications filed by the objecting financial creditors.

Rejecting the contention, the High Court held that there was no procedural violation, as the interim resolution professional, who represents the corporate debtor after initiation of CIRP, was served and heard, and the objections of financial creditors were duly considered.

The court observed:

"All the stake holders in the context of the said withdrawal application were duly heard by the NCLT. The IRP was arrayed as respondent No.3 in both the writ petitions before this Court. It was represented by an Advocate, who joined the hearing through video-conferencing. No grievance was raised in respect of the order passed by the NCLT and the learned counsel representing the IRP submitted that this Court may pass appropriate orders in the present writ petitions”

The bench further noted that the NCLT had found merit in the objections raised by financial creditors who claimed large outstanding dues. It recorded:

“Upon taking note of the fact that there were huge dues payable to the respondents-banks/financial creditors, the NCLT found substance in the objection raised on their behalf and thereupon, the NCLT held that the application seeking withdrawal from the CIRP could not be allowed in view of substantial majority of financial creditors objecting to the said withdrawal.”

Holding that no exceptional ground was made out to entertain the writ petitions, the High Court dismissed them and vacated the interim stay while granting liberty to the petitioners to avail the statutory remedy of appeal before the National Company Law Appellate Tribunal.