Preservation and protection of corporate assets: resolution professional duty under IBC and interim finance subject to COC approval

Preservation and protection of corporate assets is emphasised, reiterating the resolution professional's duty to preserve assets and continue business operations under the IBC; interim finance may be raised only with approval of the committee of creditors, and the committee is directed to meet corporate insolvency resolution process costs, with conversion of security in liquidation noted as a consequence where liquidation becomes inevitable. The appellate bench declined to disturb the adjudicating authority's decision to prevent dissipation of assets and permitted further steps before the adjudicating authority in accordance with the Code.

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Issues: Whether the Appellate Tribunal should interfere with the Adjudicating Authority's order refusing to direct Axis Bank to release margin money (fixed deposits) held as security against letters of credit for meeting CIRP costs.

Analysis: The Adjudicating Authority declined the Resolution Professional's prayer to release the security, directing that company assets, whether liquid or fixed, not be dissipated and that CIRP costs be met by the Committee of Creditors. The Tribunal observed that Section 25 of the Insolvency and Bankruptcy Code, 2016 imposes on the Resolution Professional the duty to preserve and protect the assets of the corporate debtor and that interim finance may be raised only with COC approval. Given the circumstances, including the company's likely liquidation and the absence of an approved resolution plan within the extended timelines, the Tribunal found no ground to overturn the Adjudicating Authority's decision to protect assets for the liquidation stage and to require CIRP costs to be considered by the COC.

Conclusion: Appeal dismissed; the impugned order refusing to direct release of the security is not interfered with (decision in favour of Respondent).

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