Cooperation Under the IBC: The RP’s Duties, the Suspended Management’s Obligations and the Power to Impose Costs
The decision in Narayan Ramchandra Ghumatkar, Suspended Director of KSL & Industries Ltd. v. Kiran Shah, Resolution Professional decided by NCLAT Principal Bench on 30.10.2026 examines the scope of a suspended management’s obligation to cooperate with a Resolution Professional (RP) during the Corporate Insolvency Resolution Process (CIRP), and the Adjudicating Authority’s power to impose costs for conduct in proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC).
Background and Issues
The RP initiated proceedings under Section 19(2) of the IBC, alleging non-cooperation by the suspended management, and the National Company Law Tribunal (NCLT) imposed costs of ₹25,000 in connection with incorrect statements made by the suspended management.
The suspended director challenged the order, contending, inter alia, that the requisite documents had been supplied or were unavailable, that Section 19(2) should not be employed as a punitive measure without proper scrutiny of the material on record, and that the approval of the resolution plan raised questions regarding the necessity and propriety of continuing such proceedings. The dispute also concerned the relationship between Section 19(2), which addresses cooperation with the RP, and Section 70, which prescribes penalties for specified misconduct during the CIRP
Findings of the NCLAT
The National Company Law Appellate Tribunal (NCLAT) clarified that approval of a resolution plan is a commercial decision and does not, by itself, create a presumption that the suspended management has discharged its duty to cooperate with the RP. The CIRP may proceed on information obtained by the RP from alternative sources; however, this does not extinguish the suspended management’s independent statutory obligation to provide the requisite assistance and cooperation.
The NCLAT also distinguished between statutory punishment for misconduct and the imposition of costs for conduct in proceedings. Section 70 provides for punishment for specified misconduct during the CIRP, but it does not exclude the Adjudicating Authority’s power to impose costs for inappropriate conduct before it.
Further, the mere invocation of an incorrect statutory provision does not automatically invalidate an order where the authority possesses the requisite power under law. The power to impose costs was traced to Section 60(5) of the IBC, read with Rule 11 of the National Company Law Tribunal Rules, 2016.
Conclusion and Takeaway
The central lesson is that the completion of a CIRP does not retrospectively excuse non-cooperation, just as the invocation of an incorrect provision does not necessarily invalidate an otherwise lawful order. A suspended director must independently discharge the statutory duty to cooperate with the RP, irrespective of whether the RP can obtain information elsewhere or the resolution plan has already been approved. Equally, the exercise of judicial discretion must rest on an identifiable source of legal authority and the conduct established on record.
