Possession under the State Financial Corporations Act does not defeat insolvency control where no sale or transfer of assets has occurred.

Mere possession taken by a financial corporation under Section 29 of the State Financial Corporations Act does not extinguish the corporate debtor's ownership where the assets have not been sold or otherwise transferred. In that situation, the corporation is treated only as a lawful custodian for dealing with the assets, and the insolvency resolution process cannot be frustrated by pre-CIRP possession alone. The resolution professional may therefore seek delivery of possession for completion of the CIRP, and the direction to cooperate with the resolution professional is upheld.

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Issues: Whether the financial corporation, having taken possession of the corporate debtor's assets under Section 29 of the State Financial Corporations Act, 1951, was only a custodian so as to be directed to hand over possession to the resolution professional under the Insolvency and Bankruptcy Code, 2016.

Analysis: The dispute turned on the effect of Section 29 of the State Financial Corporations Act, 1951 in the context of an ongoing corporate insolvency resolution process. The controlling reasoning was that taking possession by the financial corporation did not, by itself, divest the corporate debtor of ownership where the assets had not been sold or otherwise transferred. The earlier authority relied upon held that, until transfer of the assets is completed, the corporation acts only as a person authorized by law to deal with the debtor's assets and the statutory scheme preserves continued ownership in the debtor-promoters. On that basis, the insolvency resolution process could not be defeated by the mere fact that possession had been assumed before commencement of CIRP.

Conclusion: The corporation was not entitled to retain the assets as owner, and the resolution professional was entitled to seek delivery of possession for completion of the insolvency process.

Final Conclusion: The appeals failed because the impugned order correctly directed cooperation with the resolution professional and recognized the primacy of the insolvency process in relation to assets not yet sold or transferred.

Ratio Decidendi: Mere possession taken under the State Financial Corporations Act does not extinguish the corporate debtor's ownership or prevent delivery of assets to the resolution professional when no sale or transfer has been completed.

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