Age Limit for Insolvency Professionals and Liquidation Extensions: NCLAT Chennai in Chavva Naga Sampathi Tayaru

The legal landscape of insolvency proceedings in India is frequently tested by the delicate balance between procedural adherence and the practical necessity of completing liquidation within specified timeframes. A pivotal question arises: does the attainment of the age of 70 years by an Insolvency Professional (IP) or Bankruptcy Trustee automatically mandate their removal from an ongoing assignment, and in what circumstances may an appellate tribunal decline to interfere with a further extension of the liquidation period granted by the Adjudicating Authority? The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, addressed these issues in the recent case of Chavva Naga Sampathi Tayaru v. Sri Ananda Lakshmi Narasimha Industries India Pvt. Ltd. and Anr.¹, clarifying that the expiry of an Insolvency Professional’s Authorisation for Assignment during the pendency of an existing assignment does not, by itself, terminate that assignment. The Tribunal also declined to interfere with a further liquidation extension in the particular circumstances of the case, including the fact that the extension period had already elapsed.

Factual Background and the NCLAT’s Rationale 

The factual matrix of this matter stems from the insolvency proceedings against Sri Ananda Lakshmi Narasimha Industries India Pvt. Ltd., wherein the Corporate Debtor defaulted on credit facilities amounting to over Rs. 33 crore. Following the commencement of the Corporate Insolvency Resolution Process (CIRP) and the failure to receive a viable resolution plan, the National Company Law Tribunal (NCLT), Amaravati Bench, ordered the liquidation of the entity on 19 December 2024. Although the initial liquidation was slated for completion within one year, subsequent delays necessitated a four-month extension, followed by an application for an additional 150 days. The NCLT granted a further one-month extension, a decision challenged by the Appellant the former Director and Personal Guarantor on the grounds that the NCLT lacked the power to grant a second extension under Regulation 44(2) of the IBBI (Liquidation Process) Regulations, 2016, and that the Liquidator was rendered unsuitable due to having attained the age of 70 years. In a connected appeal, the Appellant further sought the removal of the Bankruptcy Trustee in proceedings under Section 123 of the Insolvency and Bankruptcy Code, 2016, citing the same age-related incapacity.

The rationale articulated by the NCLAT centers on the functional interpretation of regulatory provisions aimed at the uninterrupted completion of insolvency processes. Regarding the extension of the liquidation period, the Tribunal observed that the Stakeholders’ Consultation Committee (SCC) had unanimously resolved to extend the time, and the 8th meeting of the SCC had met the prescribed quorum of 33% voting rights as per Regulation 22(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, as made applicable to SCC meetings in liquidation proceedings through Regulation 32B of the IBBI (Liquidation Process) Regulations, 2016  The Tribunal reasoned that any interference at the appellate stage would be counterproductive, especially since the extended period had effectively already elapsed, rendering the challenge moot. The NCLAT did not, however, lay down a general proposition that successive extensions must necessarily be granted or that the Adjudicating Authority possesses an unrestricted power to extend liquidation timelines beyond the regulatory framework 

On the contentious issue of the professional’s age, the Tribunal provided a clear interpretation of Regulation 7A of the IBBI (Insolvency Professionals) Regulations, 2016. While Regulation 7A generally governs the Authorization for Assignment (AFA), the proviso to clause (b) serves as a vital safeguard. The NCLAT held that this proviso explicitly carves out an exception, ensuring that an assignment does not cease simply because an IP attains the age of 70 years during the pendency of their work. The Tribunal underscored that there cannot be an abrupt termination of complex assignments, as such a measure would contradict the primary objective of the Insolvency and Bankruptcy Code, which is to maximize the value of the assets of the Corporate Debtor. Consequently, the appeals were dismissed, affirming that an Insolvency Professional or Bankruptcy Trustee may continue an assignment already being undertaken despite the subsequent expiry of the AFA upon attaining 70 years, thereby supporting  the orderly conclusion of ongoing liquidation and bankruptcy proceedings.

Conclusion

The decision reinforces a purposive approach to insolvency law, where the practical realities of liquidation take precedence over hyper-technical challenges. By shielding ongoing assignments from the disruptive impact of a professional reaching the age of 70, the NCLAT has provided necessary stability to the insolvency framework. The ruling is particularly significant in clarifying that the restriction under Regulation 7A concerns the acceptance or commencement of new assignments without a valid AFA and does not automatically terminate an assignment already underway. At the same time, the ruling on the liquidation extension should be read narrowly. The NCLAT declined interference in light of the valid SCC decision and the fact that the granted extension had already expired; it did not conclusively determine the broader limits of successive extensions under Regulation 44(2).

Citations

1. Chavva Naga Sampathi Tayaru v. Sri Ananda Lakshmi Narasimha Industries India Pvt. Ltd. and Anr., Company Appeal (AT) (CH) (Insolvency) (NCLAT Chennai Bench) ↩︎

Expositor(s): Adv. Jahnobi Paul,