2021 (10) TMI 1377 - Tri - Insolvency and Bankruptcy

Failure on the part of Resolution Professional to perform his duty - Seeking direction to respondent to continue providing its services to Corporate Debtor in terms of the Agreement dated 15.01.2007 executed between the Respondent and Corporate Debtor - seeking declaration that non-providing of the services with regard to Record Management Services and Record Retrieval Services by the Respondent as violated Section 14(2)(a) of the IBC - entitlement to payment in terms of agreement after commencement of CIRP of the Corporate Debtor - seeking direction to respondent to compensate the losses suffered by the Corporate Debtor on account of the refusal of the Respondent to provide uninterrupted critical services in terms of the agreement - Section 14 (2)(A) of I B Code. HELD THAT - It is therefore clear to the Bench that the Respondent Company was fully aware that the services provided by it are critical in nature. The Bench finds it clear in the averments made by the Respondent in their reply/application bearing I.A. No. 1628/2021 that the Respondent has made a wrong and fallacious interpretation of section 14(2A) when its says that this section is not applicable to the present case - The Bench also found that the refusal of the Respondent to deny access to the RP to the Business record of the Corporate Debtor is in contrary to Section 18 and 25 of the Code - The Bench notes that the business record of the Company is an indelible right of the Resolution Professional and a contractual duty of the Respondent which it has has failed to perform. In view of this the Bench, the Bench is of the views and as pleaded by the Corporate Debtor that the Corporate is entitled for cost incurred by the Respondent under Section 235A of the Code. The Corporate Debtor pleaded that it had to continue to render establishment cost in several cities during the Covid period because of non-availability of data from the Respondents because of which it could not take a decision regarding release of properties taken on rent. Thus, as per the Corporate Debtor has resulted into an additional cost of about Rs. 6.22 crores. The Respondent is directed to continue providing its services to the Corporate Debtor as per the terms of the Agreement dated 15.01.2007 executed between the Respondent and the Corporate Debtor - Since the Respondent has not provided any services from the commencement of CIRP dated 22.10.2019 till the present date, the Respondent is not entitled to any payment in terms of the agreement towards Record Management Services and Record Retrieval Services for this period. It is also directed to refund payments, if any, back to the RP/Corporate Debtor as refund for the period between commencement of the CIRP on 22.10.2019 till present. Application allowed.

Summary

Issues:
1. Non-provision of services by Respondent under Insolvency and Bankruptcy Code.
2. Dispute over access to business records and information.
3. Violation of payment terms and critical services provision.
4. Interpretation of sections 14(2)(a), 14(2A), 18, and 25 of the Code.
5. Claim for compensation and penalties for non-compliance.

Analysis:
1. The Tribunal addressed the issue of the Respondent's refusal to provide services to the Corporate Debtor under the Insolvency and Bankruptcy Code. The Resolution Professional filed applications against the Respondent for blocking access to Record Management and Retrieval Services, crucial for assessing the Corporate Debtor's financial position.

2. A dispute arose over the Respondent's denial of access to business records and information essential for the Corporate Debtor's operations during the Corporate Insolvency Resolution Process. The Respondent demanded 100% advance payment, contrary to the agreed payment terms, hindering the RP's ability to manage the Corporate Debtor effectively.

3. The Tribunal found the Respondent's actions to be in violation of Section 14(2)(a) of the Code, which mandates the continuous supply of critical goods or services during the moratorium period. The Respondent's refusal to provide services despite full payment as per the agreement terms was deemed non-compliant and detrimental to the Corporate Debtor's operations.

4. The Tribunal analyzed sections 14(2A), 18, and 25 of the Code to determine the Respondent's obligations and the RP's rights regarding access to business records and the protection of the Corporate Debtor's assets. The Respondent's misinterpretation of the Code's applicability was highlighted, emphasizing the critical nature of the services in question.

5. Considering the impact of the Respondent's actions on the Corporate Debtor's operations, the Tribunal ordered the Respondent to resume services as per the agreement, refund any payments received during the CIRP period, and imposed a fine of Rs. 20 lakhs for violating Section 14(2A). Additionally, the Tribunal dismissed one application and allowed relief in favor of the Corporate Debtor in the other applications.

This detailed analysis of the Tribunal's judgment encapsulates the key issues and the Tribunal's comprehensive assessment of each aspect of the case under the Insolvency and Bankruptcy framework.