The National Company Law Tribunal (NCLT) Ahmedabad has ruled that the unauthorized relocation of a corporate debtor’s registered office during the Corporate Insolvency Resolution Process (CIRP) constitutes a violation of the Insolvency and Bankruptcy Code (IBC) but does not automatically attract penal consequences. The bench, comprising Judicial Member Shammi Khan and Technical Member Sanjeev Sharma, observed that while the management of a corporate debtor vests in the Interim Resolution Professional (IRP) upon commencement of proceedings, the imposition of criminal penalties requires strict proof of fraudulent intent.

The dispute arose after the liquidator of Nagaur Water Supply Company Private Limited filed an application alleging that the suspended management had improperly filed Form INC-22 with the Registrar of Companies to shift the registered office after the CIRP had already commenced. The liquidator argued that this action was a deliberate attempt to obstruct the resolution process and requested the tribunal to impose penalties under Section 68 of the IBC, which deals with the punishment for concealment of property or falsification of records.

In its judgment, the tribunal clarified that while the act was procedurally incorrect, the evidence presented was insufficient to satisfy the stringent requirements for criminal prosecution. The bench emphasized that because Section 68 carries significant penal weight, the essential ingredients—specifically the intent to defraud or conceal the state of affairs—must be clearly established. “Section 68 of the Code being penal in character, its ingredients must be established strictly in accordance with the statutory provision,” the court noted.

The tribunal further observed that the suspended directors had provided a justification for the move, claiming that the previous office space was insufficient to house the company’s extensive documentation and that the landlord had issued a notice to vacate. Crucially, the suspended management had informed the Resolution Professional of the change through an email correspondence shortly after the incident. The bench found that the absence of a direct nexus between the change of address and any concealment of company assets or property was a mitigating factor that protected the respondents from the requested criminal sanctions.

Jurisdictional Limits and Procedural Irregularities

A significant aspect of the tribunal’s reasoning was the limitation of its own authority regarding criminal matters. Following the precedent established by the National Company Law Appellate Tribunal in recent judgments, the NCLT Ahmedabad bench held that it lacks the jurisdiction to convict or impose sentences for offences defined under Chapter VII of Part II of the IBC. Such matters, the bench noted, are the exclusive domain of the Special Courts established under Section 236 of the IBC. This ruling serves as a reminder to practitioners that the NCLT acts primarily as an adjudicating authority for corporate insolvency, and requests for criminal conviction must be directed toward the appropriate judicial forums.

“This Adjudicating Authority has no jurisdiction to convict or impose punishment for an offence under Chapter VII of Part II of the Code,” the court stated in its order. By clarifying this jurisdictional boundary, the NCLT has reaffirmed the procedural hierarchy required when parties seek to penalize the actions of a corporate debtor’s suspended management.

The tribunal maintained that while the office shift was unauthorized, it did not reach the threshold of criminal fraud. The court highlighted the statutory protections available to individuals who can demonstrate a lack of malicious intent. “The statutory proviso further protects a person who establishes absence of intent to defraud or conceal the state of affairs of the Corporate Debtor,” the bench added, noting that the respondents had even expressed a willingness to restore the original office address, provided the landlord granted the necessary permission.

Oversight of Administrative Actions During CIRP

The ruling underscores the importance of the IRP’s authority over the corporate debtor's administrative affairs once CIRP is initiated. Under Section 17 of the IBC, the management of the corporate debtor vests entirely in the IRP, and the powers of the board of directors are suspended. The tribunal made it clear that any action taken by the suspended board without prior approval from the IRP is legally impermissible, regardless of the motivations behind such actions.

In this specific case, the NCLT partially allowed the liquidator’s application. While it rejected the demand for penal action under Section 68, it formally declared the relocation of the registered office during the CIRP to be contrary to the provisions of Section 17 of the IBC. The order effectively invalidates the administrative process that allowed the change to proceed, and the Registrar of Companies has been directed to take consequential actions in accordance with the law to rectify the records.

This decision serves as a clarification for corporate debtors and insolvency professionals regarding the limits of administrative autonomy during the resolution process. It reinforces that while the tribunal will strictly enforce the governance mandates of the IBC—such as the suspension of board powers—it will exercise caution when applying penal provisions. Practitioners should view this as a cautionary tale: unauthorized administrative changes may lead to remedial orders and regulatory scrutiny even if they do not meet the high evidentiary burden required for criminal conviction. The case concludes with the tribunal disposing of the interlocutory application, leaving the path open for the Registrar of Companies to reconcile the company’s statutory filings with the requirements of the Code.