Moratorium under IBC Section 14(1)(b) voids LLP expulsion of corporate debtor partner and share redistribution during CIRP, as it divests asset despite contractual/LLP Act provisions; CIRP admission not 'insolvency adjudication'.

ORDER

1. The present Application has been filed under Sections 60(5), 14 and 74 of the Insolvency and Bankruptcy Code, 2016 (“Code”), read with Rule 11 of the National Company Law Tribunal Rules, 2016, alleging that the Applicant was illegally removed as a partner from Respondent No.1, a Limited Liability Partnership, during the subsistence of the moratorium declared under Section 14 of the Code, and that such removal is void and non est in law. The Applicant accordingly seeks restoration of its status as a Partner in Respondent No.1, along with consequential reliefs.

2. Application

2.1 Respondent No.1 is a Limited Liability Partnership, incorporated on 24.01.2018 under the provisions of the Limited Liability Partnership Act, 2008 (LLP Act). Respondent Nos.2 to 5 are stated to be the partners of Respondent No.1. Respondent No.6 is the Lender, Respondent No.7 is the Security Trustee, and Respondent No.8 is the Borrower under the Memorandum of Deposit of Title Deeds dated 07.02.2024 and Deed of Hypothecation dated 05.02.2024.

2.2 A Partnership Agreement (LLP Agreement) was entered into amongst the partners and was subsequently modified on 27.08.2021 and on various other dates. Under the said arrangement, Respondent Nos.2 to 5 and the Applicant were partners of Respondent No.1, with the Applicant holding a 20% partnership interest.

2.3 During the subsistence of the Corporate Insolvency Resolution Process (CIRP) of the Applicant and the operation of moratorium under Section 14 of the Code, Respondent Nos.2 to 5 are stated to have removed the Applicant as a partner of Respondent No.1 by resolution dated 11.03.2024.

2.4 The alleged removal is stated to have come to light only upon receipt of a letter dated 22.07.2025 through which certain financial records of Respondent No.1 were furnished. Upon further inquiry, it was discovered that the Applicant had been expelled from Respondent No.1 without any prior notice or opportunity.

2.5 Following approval of the Resolution Plan, the new management of the Corporate Debtor attempted to take charge of its assets and exercise partnership rights in Respondent No.1. However, access to partnership records was denied and the status of the Corporate Debtor’s capital contribution could not be ascertained.

2.6 It is also alleged that Respondent Nos.1 to 5 executed a Memorandum of Deposit of Title Deeds dated 07.02.2024 and a Deed of Hypothecation dated 05.02.2024 in favour of Respondent No.7, IDBI Trusteeship Services Ltd., acting as Security Trustee for Respondent No.6, IndusInd Bank Limited, in relation to credit facilities extended to Respondent No.8, M/s Vasavi Constructions LLP, thereby creating security interest over the properties of Respondent No.1.

2.7 These transactions were undertaken during the CIRP period of the Applicant, i.e. between 18.07.2023 and the alleged expulsion on 11.03.2024, without notice to or approval of the Interim Resolution Professional/Resolution Professional, and are therefore claimed to be in violation of the moratorium under Section 14 of the Code.

2.8 The Applicant asserts that the 20% partnership interest constitutes a legal and beneficial interest in Respondent No.1 and that its removal during the moratorium is void. Restoration of the Applicant’s status as partner is therefore sought along with consequential reliefs.

3. Counter of Respondent Nos. 1 to 5 and 8

3.1 Respondent Nos.1 to 5 do not dispute that the Applicant was a partner holding a 20% share in Respondent No.1 prior to the commencement of the moratorium. The remaining averments in the Application have, however, been denied.

3.2 In accordance with Article 24.3(e) of the Principal LLP Agreement dated 24.01.2018, the Designated Partners passed a unanimous resolution dated 11.03.2024 expelling