Section 14(1)(d) Does Not Bar Property Return When CoC and Resolution Professional Decide to Relinquish Possession: Supreme Court

“Commercial Wisdom of CoC Prevails Over Moratorium: Supreme Court Restores Return of Property to Owner During CIRP” - In a significant decision on August 5, 2025, the Supreme Court of India settled the contentious issue of whether property in possession of a corporate debtor can be returned to its owner during a Corporate Insolvency Resolution Process (CIRP), when such return is directed by the Resolution Professional and Committee of Creditors (CoC) themselves. The Court emphatically ruled that Section 14(1)(d) of the Insolvency and Bankruptcy Code (IBC) does not create an artificial bar to return of property when the CoC, exercising its “commercial wisdom”, finds retention financially unviable.

Nandini Impex Pvt. Ltd., the corporate debtor, had defaulted on loans advanced by the appellants, secured by title deeds to property known as “White House” in New Delhi. Though ownership was transferred to the appellants following default, possession was retained by the corporate debtor under a leave and license arrangement—subject to hefty rentals.

With ongoing default in rental payments, the leave and license agreements were terminated and eviction suits were filed. Meanwhile, UCO Bank triggered CIRP against Nandini Impex. UCO Bank, as sole member of the CoC, and the Resolution Professional reviewed the necessity of retaining the “White House” property during CIRP and unanimously decided continued possession was unsustainable due to high cost and limited use.

The NCLT Kolkata, acting on CoC’s decision, directed return of possession to the appellants. However, the NCLAT set aside this order, holding that Section 14(1)(d) imposed a moratorium barring any recovery of property from the corporate debtor. The NCLAT remanded the matter for fresh adjudication. Aggrieved, the appellants approached the Supreme Court.

“Commercial Wisdom of the CoC Is Paramount—Judicial Intervention Is Limited”

Relying on the established principle in K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC 150, the Supreme Court highlighted:

“The commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code... The legislature, consciously, has not provided any ground to challenge the ‘commercial wisdom’ of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable.”

In this case, both the CoC (UCO Bank) and the Resolution Professional categorically affirmed that retention of the property imposed a “huge financial burden” and was unnecessary for CIRP. The Court emphasized that except for the lone suspended director—who himself refused to bear costs—all stakeholders supported relinquishing possession.

“Section 14(1)(d) Moratorium Not Triggered When Surrender Is Voluntary and Commercially Justified”

Justice Sanjay Kumar, speaking for the Bench, clarified the distinction:

“It is manifest that this was not a simple case of the owner of the property seeking recovery of possession... On the other hand, as already noted hereinbefore, it was the CoC and the Resolution Professional who were and still are desirous of returning the possession of the property... keeping in mind the adverse financial implications of retaining the same.”

Thus, the Court held that Section 14(1)(d) of IBC, which ordinarily bars an owner from recovering possession during the CIRP moratorium, does not apply when the return of property is the informed, unanimous decision of the CoC and Resolution Professional.

“Obstruction by Suspended Director Unjustified and Tainted by Extraneous Motives”

The Bench was critical of the respondent (suspended director) who alone opposed the move:

“It appears that Chandrakant Khemka, respondent No. 1, who is not willing to personally bear the expenditure for such retention, is bent upon stalling that process for some undisclosed and extraneous reasons.”

The Supreme Court unequivocally set aside the NCLAT’s order of remand, restored the NCLT’s directive for immediate return of the property, and ordered:

• Section 14(1)(d) moratorium does not bar property return under CoC/Resolution Professional’s commercial decision.

• Obstruction by suspended director was unwarranted and without substance.

• Order of NCLT, Kolkata Bench dated 07.08.2023 is restored; the Resolution Professional must act expeditiously to return possession to the appellants.

This judgment is a strong reaffirmation that the “commercial wisdom” of the Committee of Creditors and the Resolution Professional is sacrosanct under the IBC, and judicial intervention in such matters is limited. Section 14(1)(d) is not a shield for obstruction, especially where all relevant stakeholders—except the obstructive director—agree that surrendering the property is in the best commercial interest of the CIRP.

“When UCO Bank, constituting the CoC, decided that retention of the possession of the subject property was not in the interest of the CIRP, that decision must be given the respect that is lawfully due to it.”

The ruling clarifies that the moratorium under Section 14(1)(d) cannot be invoked to frustrate the very purpose of a resolution process, particularly when continued possession is detrimental to the interests of creditors and resolution applicants.

Date of Decision: 05 August 2025