SC upholds CoC's authority under Section 14(1)(d) IBC to return property during CIRP respecting commercial wisdom

The SC upheld the authority of the CoC during CIRP under Section 14(1)(d) of the IBC, emphasizing that the CoC's commercial wisdom must be respected. The CoC and RP decided that retaining possession of certain property was financially detrimental and resolved to return it to the owner. The SC set aside the NCLAT order that reversed the NCLT's decision allowing return of the property and restored the NCLT order permitting possession to be handed back. The RP was directed to implement the order without delay. The appeal was allowed.

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ISSUES:

Whether the Committee of Creditors (CoC) has the authority to decide on the retention or relinquishment of possession of property by the corporate debtor during Corporate Insolvency Resolution Process (CIRP).Whether Section 14(1)(d) of the Insolvency and Bankruptcy Code (IBC) prohibits recovery of possession of property by an owner or lessor when such property is occupied by the corporate debtor during the moratorium.Whether the decision of the National Company Law Appellate Tribunal (NCLAT) to remand the matter for fresh adjudication was justified in light of the facts and statutory provisions.The extent to which the commercial wisdom of the CoC is to be respected and given primacy during CIRP.

RULINGS / HOLDINGS:

The CoC, as the collective decision-making body under the IBC, has the authority to decide not to retain possession of property by the corporate debtor, and such commercial wisdom must be given primacy during CIRP.Section 14(1)(d) of the IBC prohibits recovery of property by an owner or lessor during moratorium only where the property is occupied by or in possession of the corporate debtor; it does not bar the return of possession to appellants when the CoC and Resolution Professional decide the property is not required.The NCLAT's order remanding the matter for fresh adjudication was unwarranted because the decision to return possession was supported by the CoC and the Resolution Professional, and the opposition by the suspended director lacked merit.The order of the National Company Law Tribunal (NCLT) directing delivery of possession to the appellants is restored, and the Resolution Professional is directed to implement it expeditiously.

RATIONALE:

The Court applied the statutory framework of the Insolvency and Bankruptcy Code, 2016, particularly Sections 7, 14(1)(d), and 62, alongside established precedent emphasizing the non-justiciability of the commercial wisdom of the CoC as enshrined in K. Sashidhar v. Indian Overseas Bank.The Court recognized the primacy of the CoC's commercial decisions during CIRP, noting that the legislature intended to speed up debt recovery by limiting judicial interference in CoC decisions.The Court distinguished between recovery of possession by an owner barred under Section 14(1)(d) and the consensual relinquishment of possession by the corporate debtor on the CoC's direction, clarifying that the latter does not violate the moratorium.The Court rejected the remand by NCLAT as unnecessary given the consensus among the CoC, Resolution Professional, and other stakeholders, except the suspended director, who was not willing to bear the financial burden of retention.

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