2019 (12) TMI 1314 - AT - Insolvency and Bankruptcy

Cash Withdrawals after approval of IRP - management of Corporate Debtor after admission of Section 9 application is with the IRP/RP - HELD THAT - Considering the submissions made and serious objections that the learned Counsel for the IRP is raising and considering the fact that the order dated 23.10.2019 was passed by Three Judge Bench headed by Hon ble Chairperson, considering the gravity and seriousness of the matter, we direct the Registry to place the matter before the Hon ble Chairperson to constitute appropriate Bench. The matter may be re-listed before the Bench as the Hon ble Chairperson may direct. Tentatively, we post the matter to 6th January, 2020. List the appeal on 6th January, 2020 before Bench as may be directed by Hon ble Chairperson.

Summary

Issues:
1. Unauthorized withdrawals made by the Directors without approval of the Insolvency Resolution Professional (IRP).
2. Compliance with the orders passed by the National Company Law Appellate Tribunal.
3. Role and responsibilities of the Directors and IRP/RP post-admission of Section 9 application.
4. Directions regarding the constitution of an appropriate Bench by the Hon'ble Chairperson.

Analysis:
1. The case involved an Interlocutory Application (I.A.) filed by the Resolution Professional against two Respondents, who were Directors of the Corporate Debtor. The Directors were accused of making unauthorized withdrawals without the approval of the IRP, contrary to the orders passed by the Tribunal.

2. The Tribunal noted that the Directors had failed to comply with the order dated 23.10.2019, which required the authorized person to obtain IRP approval before signing bank cheques for withdrawals. The Directors justified the withdrawals as necessary payments to suppliers, workmen, and electricity bills to maintain the Corporate Debtor as a going concern. However, the Tribunal expressed dissatisfaction with the Affidavits filed by the Directors.

3. It was emphasized that post the admission of the Section 9 application, the management of the Corporate Debtor was under the purview of the IRP/RP, as per the provisions of the Insolvency and Bankruptcy Code, 2016. The Directors were expected to assist the IRP in keeping the company operational. The Tribunal highlighted that the Directors had taken actions without involving the IRP, which was against the Tribunal's previous orders and the statutory framework.

4. In light of the seriousness of the matter and the objections raised by the Counsel for the IRP, the Tribunal directed the Registry to place the case before the Hon'ble Chairperson to constitute an appropriate Bench. The Respondent Directors were required to personally appear on the next date, deposit the withdrawn money back into the account, and provide reasons why further action should not be taken against them. The case was tentatively scheduled for a hearing on 6th January 2020 before the Bench directed by the Hon'ble Chairperson.