2020 (11) TMI 1048 - Tri - Insolvency and Bankruptcy

Seeking direction to the suspended Board of Directors for providing the record and other information of the Corporate Debtor - application filed under Section 19(2) of Companies Act - HELD THAT - On one pretext or the other, there is no compliance with the order of this court which makes it clear that the Suspended Board of Directors have not maintained the record of the CD. In other words, they have failed to perform their fiduciary duties in maintaining the record of the Corporate Debtor. Whereas they are duty bound to maintain the record of the CD for a period of not less than 8 years as mandated under the provisions of Section 128 (5) of the Companies Act, 2013. The Directors namely Mr. Ashish Chaturvedi and Mr. Sanjay Kapoor have grossly violated the provisions of Section 128 (5) of the Companies Act, 2013 for which the punishment is provided under Section 128 (6) of Companies Act, 2013. The only option before this Authority/Tribunal is to invoke the provision of Section 128 (6) of the Companies Act, 2013 and impose penalty as prescribed. Looking to the conduct of the Suspended Board of Directors, penalty of ₹ 5 Lakhs on each viz., Mr. Ashish Chaturvedi and Mr. Sanjay Kapoor is levied - total ten lakhs shall be deposited to the Accounts of the Government of India, Ministry of Corporate Affairs, within a period of four weeks from the date of passing of this order and thereafter compliance reports shall be submitted by the counsel for Respondent No. 1 and 2 to the Registry - application disposed off.

Summary

Issues:
1. Failure of Suspended Board of Directors to provide records and information of the Corporate Debtor.
2. Violation of provisions of Section 128(5) of the Companies Act, 2013 by the Directors.
3. Imposition of penalty under Section 128(6) of the Companies Act, 2013.

Analysis:
1. The Tribunal dealt with the issue of the Suspended Board of Directors failing to provide records and information of the Corporate Debtor. The Resolution Professional sought direction under Section 19(2) for the suspended Directors to provide the necessary records. Despite multiple orders directing compliance, the Directors, Mr. Ashish Chaturvedi and Mr. Sanjay Kapoor, did not maintain the records, breaching their fiduciary duties. The Tribunal found a lack of compliance and held that the Directors violated their obligation to maintain records for a minimum of 8 years as per Section 128(5) of the Companies Act, 2013.

2. The judgment addressed the violation of Section 128(5) of the Companies Act, 2013 by the Directors. It was noted that the Directors, Mr. Ashish Chaturvedi and Mr. Sanjay Kapoor, grossly contravened this provision, which mandates the maintenance of corporate records. The Tribunal highlighted that such violation attracts penalties under Section 128(6) of the Companies Act, 2013. Consequently, the Tribunal concluded that invoking the provisions of Section 128(6) was necessary due to the Directors' failure to fulfill their statutory duties regarding record-keeping.

3. Regarding the imposition of penalties under Section 128(6) of the Companies Act, 2013, the Tribunal decided to levy a penalty of ?5 Lakhs on each of the Directors, Mr. Ashish Chaturvedi and Mr. Sanjay Kapoor. The total penalty amounting to ?10 Lakhs was directed to be deposited into the Government of India's Ministry of Corporate Affairs account within four weeks from the date of the order. Furthermore, the Tribunal mandated that compliance reports be submitted to the Registry by the counsel representing the Directors. This decision was made based on the conduct of the Suspended Board of Directors and the necessity to enforce penalties for their non-compliance with statutory obligations.

In conclusion, the Tribunal's judgment focused on the failure of the Suspended Board of Directors to provide corporate records, the violation of statutory provisions by the Directors, and the subsequent imposition of penalties under the Companies Act, 2013.