2019 (11) TMI 1526 - Tri - Insolvency and Bankruptcy

Handing over the entire documents, and other material which is in possession of the corporate debtor during the process of CIRP - direction to the 2nd and 3rd Respondents provide the books of accounts, Vouchers, financial statements for the year ended March 31, 2017 and March 31, 2018, all the schedules and details pertaining to the year ending 31 March, 2016 - direction to 2nd and 3rd Respondents to provide Provident Fund returns, proof of employment and challans paid and list of employees - HELD THAT - There seems to be dereliction of duty on the part of the Respondent Nos.1 to 4 by not providing the necessary information to the Applicant viz., Liquidator to perform his function effectively and it will be of no avail of them to point an accusing finger at each other all of which seriously undermines the interest of creditors including employees of the Corporate Debtor. Therefore, we hereby direct each of the Respondents either individually or jointly to provide all the data and information to the Liquidator as sought for, particularly, in relation to the financial statements for the year ended 31.03.2017 as well as for the year ended 31.03.2018 within a period of three weeks from today. It is evident from the averments made in the Application and as well as during the course of submissions of the Applicant and R2 and R4 as R1 did not choose to appear at the time of oral submissions, that the IRP/RP has grossly failed in his duty to maintain even the 'essential services' of the Corporate Debtor, which is required to be taken note of by the Insolvency and Bankruptcy Board of India (IBBI), being the Regulator and a suitable action be initiated against the IRP/RP viz., Karthigeyan Srinivasan, after due enquiry, as contemplated under the Scheme of the I B Code, 2016 and the Regulations framed there under by IBBI in relation to conduct of IRP/RP of Corporate Persons during the CIR Process as the Regulator is the person which can take the action for the omissions and commissions purported to have been committed by the IRP/RP as evident in the present instance for which purpose the copy of this Order be forwarded by the Registry to IBBI. The Applicant viz., Liquidator is directed to file the report about the compliance on the part of the Respondents, within 4 weeks from today.

Summary

Issues Involved:
1. Handing over documents and materials by the 1st Respondent.
2. Provision of financial statements and other records by the 2nd and 3rd Respondents.
3. Provision of Provident Fund returns and employment proofs by the 2nd and 3rd Respondents.
4. Dereliction of duty by the IRP/RP and the 4th Respondent (M/s. Amazon Web Services).
5. Non-cooperation and compliance issues by the Respondents.

Issue-wise Detailed Analysis:

1. Handing over documents and materials by the 1st Respondent:
The Liquidator filed an application under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016, seeking directions for the 1st Respondent to hand over all documents and materials in possession of the corporate debtor during the Corporate Insolvency Resolution Process (CIRP). The Tribunal noted that the records and accounts of the Corporate Debtor were not handed over by the erstwhile IRP/RP, which hindered the Liquidator's ability to verify creditor claims.

2. Provision of financial statements and other records by the 2nd and 3rd Respondents:
The Liquidator sought the books of accounts, vouchers, financial statements for the years ending March 31, 2017, and March 31, 2018, and other schedules and details for the year ending March 31, 2016, from the 2nd and 3rd Respondents. The Tribunal observed that the non-payment of fees for the 'cloud storage' led to the deletion of electronic data, which included the required financial statements. The 2nd Respondent argued that they had informed the IRP/RP about the need to maintain the 'cloud storage' by paying the fees, but the IRP/RP failed to act, resulting in data loss.

3. Provision of Provident Fund returns and employment proofs by the 2nd and 3rd Respondents:
The Liquidator also requested Provident Fund returns, proof of employment, and challans paid, along with a list of employees from the 2nd and 3rd Respondents. The Tribunal noted that the employees approached the Liquidator for closure or transfer of their Provident Fund accounts, but the necessary details were not provided by the Respondents, causing further complications in the liquidation process.

4. Dereliction of duty by the IRP/RP and the 4th Respondent (M/s. Amazon Web Services):
The Tribunal identified dereliction of duty on the part of the IRP/RP for not maintaining the essential services, such as 'cloud storage,' which is considered an essential service under Section 14(2) of the I&B Code, 2016, and Regulation 32 of the IBBI (IRP for Corporate Persons) Regulations, 2016. The Tribunal criticized M/s. Amazon Web Services for terminating the 'cloud storage' services without notice and for not filing a claim as an 'Operational Creditor' for the unpaid fees.

5. Non-cooperation and compliance issues by the Respondents:
The Tribunal emphasized the requirement under Section 19 of the I&B Code, 2016, for the personnel of the Corporate Debtor to cooperate with the IRP/RP and the Liquidator. The Tribunal directed the Respondents to provide all necessary data and information to the Liquidator within three weeks. The Tribunal also instructed the Insolvency and Bankruptcy Board of India (IBBI) to take suitable action against the IRP/RP for failing to maintain essential services, as evident in this case.

Conclusion:
The Tribunal ordered the Respondents to comply with the Liquidator's requests for documents, financial statements, and other necessary information within three weeks. The Liquidator was directed to report on the compliance within four weeks. The Tribunal also mandated the IBBI to initiate an inquiry and take appropriate action against the IRP/RP for dereliction of duty.