De-attachment of assets of the corporate debtor

Brief Overview:

Duty of the resolution professional to take possession of the assets of a corporate debtor trumps claims of a statutory authorities. The NCLAT has propounded that merely because the municipal corporation has attached an asset for recovery of property tax (for which it had already filed its claim in CIRP), it cannot continue with the attachment and refuse to handover the possession to the resolution professional.

Technical Details:

1) The appeal arises out of the decision of the Adjudicating Authority (“AA”) in handing over the posession of a property to the resolution professional after lifting the attachment by the municiple corporation.

2) The municple corporation challenged the juridiction of the AA as the attachement could not have been lifted without filing an appeal under Section 406 of the Maharashtra Municipal Corporation Act.

3) In appeal the National Company Law Appellate Tribunal, New Delhi (“NCLAT”) held that:

(a) By only attachment of the assets, the rights entitled in the property does not vest in the municipal corporation.

(b) Municiple corporation cannot continue with attachment and refuse to handover the possession to the resolution professional.

(c) The corporate debtor is the owner of the assets hence the resolution professional is entitled to take back its possession.

4) The NCLAT gave the above findings in light of the facts of this case wherein;

(a) the resolution professional had not challenged the tax fixed or charged under the Maharashtra Municipal Corporation Act over the assets and

(b) the municiple corporation has filed its claim of property tax hence this was not a case where assets had been attached to recover the property tax.

JC takeaway:

NCLAT’s decision reaffirms the duty of the resolution professional under the Insolvency and Bankruptcy Code, 2016 to take control and custody of any asset owned by the corporate debtor including the assets which are not in its possession in order to facilitate the corporate insolvency resolution process.

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