2018 (2) TMI 2100 - AT - Insolvency and Bankruptcy

Seeking clarification as to who will sign the cheque on behalf of the Corporate Debtor - HELD THAT - It is clarified that after appointment of the Resolution Professional and declaration of moratorium, the Board of Director stands suspended, but that does not amount to suspension of Managing Director or any of the Director or officer or employee of the Corporate Debtor. To ensure that the Corporate Debtor remains on going concern, all the Director/ employees are required to function and to assist the Resolution Professional who manages the affairs of the Corporate Debtor during the period of moratorium. If one or other officer or employee had the power to sign a cheque on behalf of the Corporate Debtor prior to the order of moratorium, such power does not stand suspended on suspension of the Board of Directors nor can be taken away by the Resolution Professional. If, the person empowered to sign cheque refuse to function on the direction of the Resolution Professional or misuse the power, in such case it is always open to the Resolution Professional to take away such power after notice to the person concerned. Post the case for hearing on 12th March, 2018. Case may be disposed of on the next date.

Summary

Issues Involved:
1. Settlement possibility in the matter
2. Authority to sign cheques on behalf of the Corporate Debtor post moratorium

Analysis:
1. The judgment begins with the counsel for the respondents stating that there is no chance of settlement in the matter, leading to the case being required to be heard on merit. This decision indicates the importance of settlement discussions and the subsequent need for a thorough hearing when settlement is not possible.

2. The judgment addresses the issue of who has the authority to sign cheques on behalf of the Corporate Debtor after the appointment of the Resolution Professional and declaration of moratorium. It clarifies that the suspension of the Board of Directors does not extend to the Managing Director, other directors, officers, or employees of the Corporate Debtor. All directors and employees are required to assist the Resolution Professional during the moratorium period to ensure the ongoing operations of the Corporate Debtor. The judgment emphasizes that if an individual had the authority to sign cheques before the moratorium, this power is not automatically suspended with the Board's suspension. However, the Resolution Professional can intervene if there is a refusal to function or misuse of power, with the ability to revoke such authority after providing notice.

Overall, the judgment highlights the significance of settlement discussions and the necessity of a thorough hearing when settlement is not feasible. It also clarifies the authority to sign cheques on behalf of the Corporate Debtor post moratorium, emphasizing the roles of various stakeholders and the Resolution Professional in ensuring the continued operation of the Corporate Debtor during the moratorium period.