2019 (10) TMI 455 - Tri - Insolvency and Bankruptcy

Taking over possession of asset of Corporate Debtor - HELD THAT - Though it appears that the custody of the asset lying with R5 basing on the Assignment Agreement aforementioned through R6, which earlier taken over the possession of this asset from the Corporate Debtor under SARFAESI proceedings, it is evident till date ownership of the asset lying with the Corporate Debtor, whereby, this asset is still to be considered as the asset of the Corporate Debtor but not either as the asset of R6 or as the asset of R5 - Since the proceedings taken out under SARFAESI will not have any bearing on the CIRP initiated under the Code unless the title of the property of the Corporate Debtor has been fully conveyed either to the Financial Creditor or to the third party as stated under the SARFAESI Act, though part consideration has been passed between the parties, it will not become an impediment to the RP to take the custody and control of the assets as contemplated under Sec.25 (2) of the IBC. It is directed to deliver the possession and custodial control over the asset of the Corporate Debtor to the RP within 10 days hereof - application allowed. Production of the records of the Corporate Debtor from the erstwhile Directors - HELD THAT - The RP is unable to trace out records of the Corporate Debtor from the Suspended Directors till date. On there being no undertaking from these Respondents to provide records of the Company to the RP, this RP is entitled to seek assistance from the Chief Metropolitan Magistrate/Chief Judicial Magistrate/District Collector as contemplated under Section 19(2) r/w 429 of the Companies Act, 2013 for availing the required documents from these Suspended Directors. This Bench hereby directs R1 to R4 to provide the required documents to the RP within 10 days hereof, failing which, this Bench hereby requests the District Collector of Madurai to provide assistance to the RP take custody of the records sought by the RP as well as any other assistance that is essential in discharging his functions as RP in the CIRP period as contemplated under Section 19(2) of IBC r/w 429 of the Companies Act, 2013 - Application allowed.

Summary

Issues Involved:
1. Immediate custody and control of assets under the Insolvency and Bankruptcy Code, 2016.
2. Production of company records by erstwhile directors during Corporate Insolvency Resolution Process (CIRP).

Analysis:
1. The judgment addressed the issue of immediate custody and control of assets under the Insolvency and Bankruptcy Code, 2016. The case involved an Asset Reconstruction Company (R6) that had taken possession of a Corporate Debtor's asset under SARFAESI proceedings. Another company (R5) had entered into agreements related to the same asset. The Resolution Professional (RP) filed a Miscellaneous Application (MA) seeking custody of the asset, which was still considered the property of the Corporate Debtor. The Tribunal held that despite the possession by R5 and previous proceedings under SARFAESI, the asset remained the property of the Corporate Debtor. Therefore, the RP was entitled to immediate custody and control of the asset from R5. The judgment directed R5 to deliver possession and custodial control of the asset to the RP within 10 days, allowing the application.

2. The judgment also dealt with the issue of production of company records by erstwhile directors during the Corporate Insolvency Resolution Process (CIRP). The erstwhile directors (R1 to R4) claimed they no longer had the company records as the asset had been taken over by R6 and then by R5. They argued that they had donated their shares to a Trust and had no documents to provide. The RP contended that the directors were still involved in financial matters like filing tax returns and maintaining bank accounts, indicating their knowledge of the company's affairs. As the directors failed to provide the required documents, the Tribunal directed R1 to R4 to provide the records to the RP within 10 days. In case of non-compliance, the District Collector of Madurai was requested to assist the RP in obtaining the necessary documents and fulfilling his duties during the CIRP period.

In conclusion, the judgment resolved the issues of immediate custody and control of assets under the Insolvency and Bankruptcy Code, 2016, and the production of company records by erstwhile directors during the Corporate Insolvency Resolution Process. The Tribunal upheld the RP's right to take custody of the asset from R5 and directed the erstwhile directors to provide the company records within a specified timeframe, with the option of seeking assistance from the District Collector in case of non-compliance.