Resolution Professional retains management control after NCLT order set aside during stayed insolvency proceedings

NCLAT set aside NCLT's order directing Resolution Professional to handover corporate debtor's management to CEO/Management. NCLAT held that NCLT erred in entertaining applications and issuing directions while CIRP was stayed by SC and related appeal remained pending before SC. Adjudicating Authority should have stayed proceedings and relegated parties to approach SC for further directions. Resolution Professional retains discretion to manage corporate debtor as going concern without CIRP steps, pending SC's interim order. NCLT committed error by not staying hands from passing orders on CIRP-related applications during pendency of SC appeal.

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Issues Involved:
1. Whether the Resolution Professional ought to have handed over the affairs of the Corporate Debtor to the directors in view of the stay order passed by the Hon'ble Supreme Court of India on 25 February 2022.
2. Legality of the removal of the Executive Editor by the Resolution Professional.
3. Legality of the appointment of a new Executive Editor by the Resolution Professional.
4. Whether the Adjudicating Authority should have entertained the applications due to the pending Civil Appeal before the Hon'ble Supreme Court.

Summary:

Issue 1: Handing Over Affairs to Directors
The Adjudicating Authority directed the Resolution Professional to hand over the management of the Corporate Debtor to the CEO/Management of the Corporate Debtor, interpreting the Supreme Court's stay of the CIRP as necessitating this transfer. The Tribunal found this interpretation erroneous, noting that the stay of CIRP does not imply the Resolution Professional must hand over control to the ex-management. The Tribunal emphasized that such a handover could lead to misuse of assets, adversely affecting creditors.

Issue 2: Removal of Executive Editor
The Resolution Professional terminated the Executive Editor's contract, citing the expiration of the contract and the executive reaching 60 years of age. The Respondent challenged this, claiming the termination violated the Supreme Court's interim order. The Tribunal noted that the Respondent had approached the Supreme Court for contempt proceedings regarding this termination, and thus, the Adjudicating Authority should not have entertained the application.

Issue 3: Appointment of New Executive Editor
The Tribunal found that the Resolution Professional's actions, including the appointment of a new Executive Editor, were aimed at running the Corporate Debtor as a going concern, which is within his purview, especially given the company's financial losses. The Tribunal held that the Adjudicating Authority's direction to nullify these actions was inappropriate.

Issue 4: Jurisdiction of Adjudicating Authority
The Tribunal held that the Adjudicating Authority should have refrained from issuing directions due to the pending Civil Appeal before the Supreme Court. The Tribunal emphasized that any further orders or directions should be sought from the Supreme Court.

Conclusion:
The Tribunal set aside the Adjudicating Authority's order dated 30.05.2023, which had directed the Resolution Professional to hand over management to the ex-management and nullified actions taken by the Resolution Professional post the Supreme Court's interim order. Both parties were directed to approach the Supreme Court for further orders.

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