2018 (6) TMI 842 - Tri - Insolvency and Bankruptcy

Corporate insolvency resolution process - allegations against the resolution professional for not preparing Information Memorandum within 14 days of the first meeting of the COC as required by Section 25 (2) (g) of the Code - obligation on the ex-personnel of the corporate debtor, its promoter or any other person associated with the ex-management including ex-directors to extend all assistance and cooperation to the interim resolution professional - Held that - The limit of two years imposed on Resolution Professional for presenting it before COC creates no right in the ex-management to deny any information prior to two years. This provision is couched in the language which requires performance of duties by interim resolution professional / resolution professional. It does not clothe the Ex-Directors with a right to withhold information beyond period of two years. Therefore, the attempt to escape from furnishing of information is wholly against the letter and spirit of the provisions of the Code. We have distinct impression that all this is being done to avoid furnishing of vital information necessary for CIR process. Sometime people think that attack is the best defence as has been done here. The allegations against the resolution professional are bald and lack substance. There is no supporting material to consider such allegations seriously. Therefore, we reject the stance taken by the Ex-Directors-respondents. As a sequel to the above discussion, this application is allowed. The resolution professional shall take possession of the whole record which is stated to be available at House No.22422, Bhagu Road, Bhatinda, where the record has been shifted from the registered office after it was sold by the financial creditor under Section 13 of the SARFAESI Act

Summary

Issues:
Application under Section 19 (2) of the Insolvency and Bankruptcy Code, 2016 for directions to Ex-Directors/Management to cooperate with the resolution professional and provide necessary information.

Analysis:
1. The corporate insolvency resolution process was initiated, and specific directions were issued to Ex-management-Directors to provide crucial information regarding the plantation of poplar trees, uprooting of crops, and lease agreements. However, the required information was not provided, leading to allegations of financial misconduct by the corporate debtor.

2. In subsequent meetings of the Committee of Creditors (COC), further directions were issued to the corporate debtor to provide detailed information about its working, assets, and liabilities. The corporate debtor failed to hand over account books and questioned the credibility of the resolution professional.

3. The application faced opposition with allegations of bias against the resolution professional and non-compliance with the Code of Conduct. The defense argued that necessary information had already been provided to the financial creditor at the time of loan sanction.

4. The non-applicant respondents claimed that certain information had been shared with the resolution professional and cited difficulties in complying with requests due to the suspension of the Board of Directors. They also referred to specific Code provisions related to the collection of information by the resolution professional.

5. The Tribunal analyzed Section 19 of the Code, emphasizing the obligation of ex-personnel to cooperate with the resolution professional. The Tribunal highlighted that non-compliance could lead to directions from the Adjudicating Authority-NCLT.

6. The Ex-Directors were found to be engaging in irrelevant dialogue and attempting to avoid providing information by misinterpreting Section 18 (1) of the Code. The Tribunal clarified that the resolution professional's duty includes collecting information beyond two years and that withholding information was against the spirit of the Code.

7. The Tribunal allowed the application, directing the resolution professional to take possession of necessary records from a specified address. Non-compliance would result in further action, and costs were imposed on the Ex-Directors for their lack of cooperation.

8. The resolution professional was instructed to ensure cooperation and obtain the required records, emphasizing the importance of complying with legal obligations for the successful completion of the corporate insolvency resolution process.