2020 (2) TMI 1589 - AT - Insolvency and Bankruptcy

Liability of Appellant - Directorate of Economic Offences (DEO) to pay ₹ 5 Lakhs for not cooperating with the Resolution Professional in compliance to directions of the Hon ble High Court - HELD THAT - The contumacious conduct attributed to the Appellant - Delinquent Officer of the DEO for not extending cooperation to the Resolution Professional in carrying forward the process of resolution may be violative of the directions of the Hon ble High Court rendering being hauled up for Contempt of Court, same could not be linked with the order of liquidation, there being no nexus between the two. Order of liquidation, not assailed herein, rests on its own considerations independent of conduct of Appellant. Thus, while passing the order of liquidation, the Adjudicating Authority exceeded its jurisdiction in slapping the Appellant with liability of costs, which in fact was the penalty imposed for the alleged contumacious conduct - appeal allowed.

Summary

Issues:
Limited issue raised in the Appeals regarding liability of the Appellant to pay ?5 Lakhs for not cooperating with the Resolution Professional in compliance with High Court directions.

Analysis:
The judgment by the National Company Law Appellate Tribunal dealt with the issue of the Directorate of Economic Offences (DEO) being held liable to pay ?5 Lakhs for failing to cooperate with the Resolution Professional as per the High Court's directions. The Tribunal noted that the conduct of the Delinquent Officer of the DEO, which was deemed contumacious, did not necessarily warrant a link to the order of liquidation. The Tribunal emphasized that the order of liquidation, which was not challenged in the appeal, was based on independent considerations and should not be connected to the conduct of the Appellant. The Tribunal found that the Adjudicating Authority had overstepped its jurisdiction by imposing the penalty for alleged contumacious conduct as a cost on the Appellant during the liquidation order. Therefore, the Tribunal allowed the Appeals to the extent that the imposition of liability for costs on the Appellant was deemed unjustified and unsupported.

In conclusion, the National Company Law Appellate Tribunal held that while the contumacious conduct of the DEO's Delinquent Officer may have raised concerns of contempt of court, it should not have been directly linked to the order of liquidation. The Tribunal found that the Adjudicating Authority had erred in imposing the liability of costs on the Appellant, which was essentially a penalty for the alleged conduct. As a result, the Tribunal allowed the Appeals to the extent that the imposition of liability for costs on the Appellant was deemed beyond the jurisdiction of the Adjudicating Authority and unsupported by the circumstances of the case.