2018 (12) TMI 1989 - AT - Insolvency and Bankruptcy

Furnishing of documents - promoter/director is hiding information from the Resolution professional as to ensure that the transaction entered into with the related companies; its subsidiaries and third parties are not shown as receivables/debts payable to the Corporate Debtor - HELD THAT - The Appellant is directed to allow the Liquidator to inspect the records of Urban Rupi Infrastructure Private Limited and Neelkanth Palm Realty Private Limited to trace out if any of the records of the Corporate Debtor are available therein or records as mentioned in the Chart given. If any of the record of the Subsidiary Company related with the Corporate Debtor as recorded in the chart aforesaid is traced, the Appellant will hand over the copies of same to the Resolution Professional/ Liquidator. It is made clear that the Resolution Professional/ Liquidator has no jurisdiction to take over any asset of the subsidiary company of the Corporate Debtor including Urban Rupi Infrastructure Private Limited and Neelkanth Palm Realty Private Limited , therefore, the Resolution Professional cannot take the original documents available with the subsidiary companies though he may take authenticated photocopies of those documents. Part of the impugned order dated 26th April, 2018 wherein observation has been made against the Appellant is set aside and stands modified to this effect - appeal disposed off.

Summary

Issues involved:
1. Appellant challenging order of Adjudicating Authority regarding furnishing of documents related to financial transactions.
2. Dispute over documents required by Resolution Professional for advances made to various entities.
3. Issue regarding providing documents related to wholly owned subsidiaries of the Corporate Debtor.
4. Disagreement over the jurisdiction of Resolution Professional/Liquidator to take over assets of subsidiary companies.

Detailed Analysis:
1. The Appellant, a shareholder/ex-director, appealed against an order by the Adjudicating Authority concerning the disclosure of financial documents. The Authority observed discrepancies in transactions and directed the Appellant to provide specific documents within a stipulated time frame. The Appellant contested this directive, stating that certain documents were not in their possession but might be with other directors. The Resolution Professional confirmed receiving some documents from the bank related to the transactions in question.

2. A detailed dispute arose over the documents required by the Resolution Professional regarding advances made to different entities. The Resolution Professional highlighted the necessity of specific documents, such as bank statements and agreements, to ascertain the nature and status of the advances. The Appellant claimed to have already provided available documents and expressed willingness to cooperate in obtaining the remaining records from the recipients of the advances.

3. The issue extended to the provision of documents concerning wholly owned subsidiaries of the Corporate Debtor. The Resolution Professional emphasized the importance of accessing records of these subsidiaries to safeguard the assets of the Corporate Debtor. The Appellant agreed to provide the necessary documents but raised concerns about the Resolution Professional taking control of the subsidiaries without proper legal direction.

4. A crucial disagreement emerged regarding the jurisdiction of the Resolution Professional, now acting as the Liquidator, to seize assets of subsidiary companies. The Tribunal directed the Appellant to allow inspection of subsidiary records to identify any relevant documents. However, it clarified that the Resolution Professional/Liquidator could only take authenticated photocopies of documents from the subsidiaries and not seize original records. The Tribunal modified the impugned order against the Appellant and disposed of the appeal with specific observations and directions to address the issues raised during the proceedings.