State officials having management of the Corporate debtor, duty bound to handover the possession to the RP

This report explains a legal decision made by the National Company Law Tribunal (NCLT) in Jaipur regarding a company called Jaipur Metals & Electricals Limited. This company is currently in a formal insolvency process, which is a legal procedure for companies that cannot pay their debts. The main conflict was between the court-appointed official responsible for the company, known as the Resolution Professional (RP), and the company’s previous management, which includes high-ranking officials from the State of Rajasthan. The core problem was that the State Government and the suspended managers refused to hand over control of the company’s assets and records to the RP, which they are legally required to do.

The Resolution Professional, Mr. Arunava Sikdar, filed applications with the court asking for help. He explained that the insolvency process was officially started in April 2018 and confirmed by the Supreme Court. He was appointed in January 2019 to manage the company’s affairs. According to the Insolvency and Bankruptcy Code (the law for this process), his first duty is to take immediate custody of all company assets and records to protect them. However, for almost seven years, the company’s suspended Managing Director and Chairman, who are both officials of the Rajasthan government, refused to give him possession. This refusal completely stopped the insolvency process, which is supposed to be finished quickly to save the company’s value.

The State of Rajasthan and its officials gave several reasons for not handing over the company. They argued that other court cases in the Rajasthan High Court and the Supreme Court prevented them from transferring the property. They also claimed that giving control to the RP might anger the company’s workers and create a “law-and-order situation.” Furthermore, the State argued that as a “sovereign” government, it was not bound by the insolvency law that forces cooperation. They even stated they were forming their own “High-Level Committee” to find a solution they thought would be better than the one provided by the national insolvency law.

The NCLT reviewed all of these arguments and rejected every single one. The Tribunal’s order, dated November 7, 2025, stated that the other court cases the State mentioned had already been dismissed years ago, so this was not a valid excuse. It called the “law-and-order” argument baseless, pointing out that it is the State’s duty to provide police support to the RP to prevent such problems, not use the threat of unrest as an excuse to break the law. The court was highly critical of the State’s claim that the law didn’t apply to it, calling this argument “oblivious and ignorant” and clarifying that the law applies to anyone associated with a company’s management, which the State officials were.

The Tribunal was “shocked” by the State’s behavior, stating that the government and its officials had “miserably failed” in their duties and had “deliberately derailed” the entire insolvency process for nearly seven years. The court found that the State had made “deliberate attempts to misguide” the Tribunal, for example, by falsely claiming it was cooperating when it was not. The court called the State’s refusal a “gross violation” of the law and noted that the very officials entrusted with upholding the law had instead become the ones to obstruct it.

As a result of these findings, the court issued a very strict and clear order. It directed the State Government and its officials to hand over complete possession of all company assets, records, and properties to the Resolution Professional within one week. It also ordered the Chief Secretary of Rajasthan to personally ensure this happens and file a report with the court confirming it. The court directed the local police to provide “complete assistance” to the RP to help him secure the properties. Finally, the Tribunal referred the conduct of the government officials involved to the Insolvency and Bankruptcy Board of India and the Central Government for appropriate action to be taken against them for their misconduct.