Companies (Amendment) Bill, 2016 proposes to relax this rule for a wholly owned subsidiary of a

company incorporated outside India by inserting the following proviso after sub-section (1) of section
100:

“Provided that an extraordinary general meeting of the company, other than of the wholly owned
subsidiary of a company incorporated outside India, shall be held at a place within India.”

Section 24 (3) perpetuates confusion when it says the resolution professional shall give notice of
each meeting of the committee of creditors to the members of the “suspended board of directors
or partners of the corporate debtor”.

Section 25 (1) of the Code enunciates that it shall be the duty of the resolution professional “to
preserve and protect the assets of the corporate debtor, including the continued business
operations of the corporate debtor”. Sub-section (2) then lists down the actions to be undertaken
for fulfilment of the duty stipulated under sub-section (1).

In Para 11 of the judgment delivered in Innoventive Industries Ltd v. ICICI Bank and
Another [Civil Appeal Nos. 8337-8338 OF 2017][3], the Supreme Court says, “According to us,
once an insolvency professional is appointed to manage the company, the erstwhile
directors who are no longer in management, obviously cannot maintain an appeal on behalf of
the company . . . Entrenched managements are no longer allowed to continue in management if
they cannot pay their debts.”
The obiter dicta suddenly became a precedent in concluding that the Code is a confiscatory
legislation by which the directors become “erstwhile directors” and the management is “no
longer allowed to continue in management” once an insolvency professional is appointed.

The resolution professional taking over the management of the corporate debtor does not imply
that he has to perform day-to-day acts in relation to the company.

In Steel Konnect (India) Pvt. Ltd. v. M/s. Hero Fincorp Ltd. [Company Appeal (AT)
(Insolvency) No. 51 of 2017][7], it was held that the board of directors or partners of the corporate
debtor, as the case may be is suspended and their power can be exercised by the interim
resolution professional, but such exercise of power is limited to the extent to sub-section (2) of
section 17 of the Code and not for any other purpose.  It is desirable to notice that though
pursuant to section 17, the board of directors of a corporate debtor stands suspended (for a
limited period of corporate insolvency resolution process – maximum 180 days or extended
period of 90 days i.e. 270 days), but they continue to remain as directors and members of the
board of directors for all purpose in the records of Registrar of Companies under the Companies
Act, 2013. Therefore, the corporate debtor has the right to prefer appeal under sub-section (1) of
section 61 through its board of directors or authorise person or its officers.

Hence, where there are matters evidencing conflict of interests of the resolution professional with
the interest of the corporate debtor, the directors shall be free to represent the corporate debtor
before the courts. If the corporate debtor is left in the hands of the resolution professional to raise
its grievance by filing an appeal under section 61 of the Code, it will be futile, as no resolution
professional will challenge the initiation of corporate insolvency resolution process which
ultimately will challenge his appointment.

Though the order of the NCLAT in Steel Konnect (supra) is juxtaposed to the observation made
by the Hon’ble Supreme Court in Innoventive Industries (supra), yet the assertions made by the
former also deserve commendation.

A resolution professional takes over the management of the corporate debtor on “as is” basis –
just that the management comes under the powers of the resolution professional conferred on
him under the law. The officers continue functioning as they used to. The meetings of the board
and that of the committees of the board will continue to be conducted in accordance with the
applicable laws. The concerned officials will continue filing and maintaining records and
documents as required under various laws. However, the overall governance of the corporate
debtor will go in the hands of the resolution professional so as to ensure that the corporate debtor
goes through the resolution process sans hindrances. The functional machinery of the corporate
debtor remains intact under the controlled supervision of the resolution professional.

 the resolution professional is rather an agent of the adjudicating authority and not of the
company or any of its stakeholders. A resolution professional is a specialised professional and
not an employee of the corporate debtor or a businessman – his task is to facilitate and catalyse
the resolution of the corporate debtor and not get entangled in daily affairs of the company unless
that comes as an obstacle to continued business operations of the corporate debtor. The business
of a resolution professional is not to do business but to facilitate survival of business. The
resolution professional, in the short span of time allowed to him and given the object with which
he has been appointed, cannot be put into multiple shoes. Any other interpretation of the
provisions may lead to grave consequences and may actually result in ill-governance.

 Lakshmi Villas Bank v. Orchid Pharma Ltd, CP/540/(IB)/CB/2017.

 On appointment of the IRP /RP, the powers of the Board were suspended and the same vests
with the RP.
Steel Konnect (India) Private Ltd. V Hero Fincorp Limited Company , The case decided on the
matter of the suspension of the powers of Board of Directors of the company after the
appointment of the interim resolution professional under section 17 of the insolvency and
Bankruptcy Code, 2016. Application was filed in the present case to initiate the Corporate
Insolvency Resolution Process and the appeal against such was filed with the contentions that
there was no post filing notice and record of default or any evidences as specified by the I&B,
2016. Respondents contended that appellants do not have any locus to file the appeal as all the
powers are suspended under section 17 1 (a) and (b) of the IB, 2016, after the appointment of the
interim resolution professional. However, NCLAT rejected the contention and held that:
―Interim resolution professional has not been vested with the powers to sue any person on
behalf of the corporate debtors but such interim resolution professional may bring to the notice
the adjudicating authority for appropriate order.
It was further held by the NCLAT that such corporate debtors or any aggrieved person can file
an appeal under section 61 of the IB, 2016, because the appointment of the interim resolution
under section 17 of IB suspends the ‗powers‘ of the board of director (s) and not the suspension
of the board of director (s)
Arcelor Mittal India v Satish Kumar Gupta, the court observed that the role of
an RP is only to examine and confirm that each resolution plan confirms to the
requirement of section 30(2).” It further said that his role is administrative and
not adjudicatory.

An extraordinary general meeting can be called by a:

 committee member (if approved by the majority of voting committee members) or

 written request signed by at least 25% of lot owners or their representatives or
 person authorised by an adjudicator’s order.