NCLT Kolkata held suspended directors can challenge asset depletion during CIRP under the IBC.

May 4, 2026 : The Kolkata Bench of the National Company Law Tribunal has held that directors of a suspended board are not entirely barred from approaching the adjudicating authority during the Corporate Insolvency Resolution Process (CIRP), especially in cases involving allegations of asset depletion, operational mismanagement, or failure to preserve the value of the corporate debtor. The Tribunal made the observation while partly allowing two applications filed by suspended director Chandra Kant Khemka in the insolvency proceedings of Nandini Impex Private Limited.

The order was passed by a Division Bench comprising Judicial Member Bidisha Banerjee and Technical Member Siddharth Mishra in proceedings arising out of the CIRP initiated against Nandini Impex Private Limited under the Insolvency and Bankruptcy Code, 2016. The applications were filed under Section 60(5) of the IBC against the Committee of Creditors (CoC) and the Resolution Professional (RP), alleging large-scale deterioration of assets, non-payment of wages, failure to preserve machinery, and negligence in running the company as a going concern.

The suspended director alleged that the company’s machinery and equipment lying at several sites, including Najafgarh and Panchkula, had been left unattended and exposed to damage due to non-maintenance and unpaid rent. He further claimed that workers and employees had not received salaries for nearly 11 months and that the CoC, led solely by UCO Bank, had failed to release funds despite earlier directions of the Tribunal. According to the applications, the continuing deterioration had allegedly caused a depletion in the value of the corporate debtor to the extent of Rs 500 crore.

The applicant also pointed to the resignation of the earlier Resolution Professional during a crucial stage of the CIRP and claimed that the insolvency process had been mishandled, affecting ongoing projects involving Indian Oil Corporation Limited (IOCL). It was argued that the company’s relationship with IOCL had suffered and that the corporate debtor had eventually been “holiday-listed” by the public sector undertaking.

Opposing the plea, the CoC and the Resolution Professional questioned the maintainability of the applications and argued that a suspended board of directors has only a limited role after commencement of CIRP. They contended that under Section 17 of the IBC, management powers vest exclusively in the Resolution Professional and that former directors are primarily required to cooperate with the insolvency process. The respondents further argued that the claims of unpaid salaries and asset depletion were exaggerated and unsupported by evidence.

The Resolution Professional defended the actions taken during CIRP, stating that several corrective measures had been introduced, including rationalisation of employee strength and efforts to secure access to locked storage locations. The RP also argued that many employees were not engaged in productive functions and that continuation of inflated salary structures would impose an avoidable burden on the CoC in the absence of operational revenue.

Addressing the core legal issue, the Tribunal held that although the powers of the Board of Directors stand suspended once CIRP commences under Section 17 of the IBC, members of the suspended board are “not rendered completely remediless.” Referring to the Supreme Court judgment in Vijay Kumar Jain v. Standard Chartered Bank and the NCLT ruling in Anand Kariwala v. Partha Pratim Ghosh, the Bench observed that suspended directors may approach the Tribunal where issues relate to “conduct of the CIRP, preservation of assets, or violation of statutory duties by the RP or CoC.”

Rejecting the preliminary objection regarding locus standi, the Tribunal ruled that the suspended director was entitled to raise grievances concerning preservation and value maximisation of the corporate debtor’s assets. The Bench stated that the objection raised by the respondents was “not sustainable in law.”

On the allegations against the CoC and RP, the Tribunal examined Sections 20 and 25 of the Insolvency and Bankruptcy Code, which require the Resolution Professional to preserve and protect the assets of the corporate debtor and manage its operations as a going concern. The Bench observed that the Committee of Creditors, despite being guided by commercial wisdom, is still expected to act in a manner that furthers the objective of value maximisation under the IBC framework.

The Tribunal noted that key locations containing company assets had remained inaccessible because of landlord obstruction and disputes over possession. It observed that the RP should have acted more promptly and sought police assistance or Tribunal intervention at an earlier stage to secure the assets. The Bench remarked, “The RP is expected to act promptly and take necessary legal steps, such as approaching this Tribunal to seek police assistance and safeguard the assets of the CD.”

However, the NCLT stopped short of holding the CoC or the RP guilty of wilful negligence or mala fide conduct. The Bench said the alleged Rs 500 crore depletion in asset value was not substantiated through conclusive evidence and involved complicated factual and financial considerations, including valuation metrics, market conditions, and operational viability. The Tribunal further observed that any reduction in asset value could not be attributed solely to delays or operational challenges during CIRP.

While disposing of the applications, the Tribunal issued several operational directions to protect the corporate debtor’s assets and address pending dues. The RP was directed to secure access to all asset sites within two weeks, including by taking police assistance if necessary, and to conduct a physical inspection of accessible assets before filing a comprehensive report before the Tribunal within four weeks.

The Bench also directed the RP to place verified details of outstanding salaries, wages, and unpaid rent before the Committee of Creditors, which was instructed to take a reasoned decision on the matter. The applications were accordingly partly allowed and disposed of.

The ruling is significant in the evolving jurisprudence under the Insolvency and Bankruptcy Code because it reinforces that suspended directors are not entirely excluded from insolvency proceedings once CIRP begins. The decision clarifies that former management can intervene where allegations concern erosion of corporate assets, failure to maintain the company as a going concern, or breach of statutory duties by insolvency professionals and creditors. At the same time, the Tribunal maintained the balance between oversight and commercial autonomy by refusing to attribute unproven financial losses directly to the CoC or RP without concrete evidence.

Case Reference: IA (IB) No. 212/KB/2025 and IA (IB) No. 1446/KB/2025 in CP (IB) No. 1377/KB/2020 before the National Company Law Tribunal; Advocates: Rahul Auddy, Aditya Gooptu, Shaunak Mitra, Aditya Kanodia, Dripto Majumdar, Suparna Sardar, Pratik Dutta, Rishav Banerjee, Sourav Jain, Meenakshi Manot, S. Ahmed, Sharmishtha Ghosh and Ranit Roy.