2018 (2) TMI 1970 - Tri - Insolvency and Bankruptcy

Recovery of outstanding dues - rights for the benefit of the Corporate Debtor in any Judicial Proceedings - HELD THAT - Prima facie, the action of the Professional against one of the Debtor of the S.N. Plumbing appears to be a correct legal action. It is one of the duty of the Resolution Professional to recover the outstanding Debts of a Corporate Debtor against whom already CIRP is in progress - Indeed, it is the duty of the IRP/RP to take all possible steps not only to invite Resolution Applicant but to take steps for recovery of the Debts outstanding. The action against IL FS Engineering is one of such action as a Corporate Debtor by invoking the provisions of section 9 of The Code. As per the statement made before us by the RPI no other case is pending against IL FS in the capacity of a Corporate Debtor. The language of Section 60(2) and other allied provisions of The Code has no ambiguity that no two parallel Insolvency Proceedings must run against a Corporate Debtor. Hence a clarification is needed in this case that S.N. Plumbing has not submitted the impugned Petition before the respected NCLT Bench, Hyderabad in the capacity of a Corporate Debtor but undisputedly, the said Petition is filed in the capacity of an Operational Creditor by submitting Form No.5 as prescribed under The Code - We have been informed that the impugned Petition is filed by the Resolution Professional on behalf of S.N. Plumbing. This action of the Resolution Professional is a right recourse for managing the affairs of the financially stressed Company. Application allowed.

Summary

Issues:
1. Interpretation of Section 25 of The Code regarding the duties of the Resolution Professional.
2. Validity of initiating insolvency proceedings against debtors of the Corporate Debtor.
3. Clarification on the prohibition of parallel insolvency proceedings against a Corporate Debtor.

Analysis:
1. The Tribunal examined the provisions of Section 25 of The Code, which outlines the duties of the Resolution Professional. The section mandates the Professional to preserve and protect the assets of the Corporate Debtor, including representing the Debtor with third parties and exercising rights in judicial proceedings on behalf of the Corporate Debtor (Section 25(2)(b)).

2. The Resolution Professional informed the Tribunal that during the commencement of insolvency proceedings, he discovered outstanding dues from various debtors of the Corporate Debtor. He initiated insolvency proceedings against these parties to recover the debts in favor of the Corporate Debtor. Specifically, a petition was filed against a respondent debtor for an operational debt of a certain amount. The Tribunal found this action to be in line with the duties of the Resolution Professional to recover outstanding debts of the Corporate Debtor, especially when insolvency proceedings are already in progress.

3. The Tribunal considered Section 60(2) of The Code, which prohibits parallel insolvency proceedings against a Corporate Debtor. It clarified that the petition filed by the Resolution Professional in another jurisdiction was not against the Corporate Debtor but in the capacity of an operational creditor. The Tribunal emphasized that no ambiguity exists in the language of the relevant provisions, indicating that the actions taken by the Resolution Professional against the debtors of the Corporate Debtor were justified and approved by the Tribunal. The Tribunal allowed the Miscellaneous Application, affirming the validity of the proceedings initiated against the debtors of the Corporate Debtor.

In conclusion, the Tribunal upheld the actions of the Resolution Professional in initiating insolvency proceedings against the debtors of the Corporate Debtor to recover outstanding debts, in accordance with the duties outlined in The Code. The Tribunal clarified that no parallel insolvency proceedings were being pursued against the Corporate Debtor and approved the actions taken by the Resolution Professional in managing the financially stressed company.