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2020 (6) TMI 690 - AT - Insolvency and BankruptcyCIRP Process - bank account of the Corporate Debtor was being used without prior approval of the IRP - HELD THAT - The Directors acted wholly illegally once moratorium had been applied, in going ahead and withdrawing monies from the accounts at the back of IRP by even issuing cheques Self . Such acts cannot be justified in any manner. The Appellant and Deepak Daga kept telling this Tribunal that they would return the money and in spite of undertaking given and time fixed, the money has not been returned and the CIRP process is seriously hampered. Consuming whole month stated in the Undertaking and without returning any money, we find no substance in the hollow statements in I.A. No. 1075 of 2020 - Application seeking time to comply with Undertakings. The I.A. wrongly states that undertakings given were without prejudice. They were voluntarily given. There are no bona fides in seeking time. The Appellant and Deepak Daga since beginning were aware of nature of the acts they were committing in the illegal withdrawals. They disobeyed Orders of Adjudicating Authority and this Tribunal wilfully and there is wilful non-compliance of undertakings given. I.A. No. 1075 of 2020 to seek time to comply undertaking is not honest and appears to have been filed to create grounds of defence to further abuse process to kill time. The I.A. is rejected. Appeal disposed off.
Issues Involved:
1. Admission of Application under Section 9 of the Insolvency and Bankruptcy Code (IBC). 2. Interim Orders and their compliance. 3. Violations of Sections 14, 17, and 19 of IBC. 4. Unauthorized withdrawals by Directors. 5. Undertakings and their non-compliance. 6. Contempt proceedings against Directors. 7. Continuation of Corporate Insolvency Resolution Process (CIRP). Issue-wise Detailed Analysis: 1. Admission of Application under Section 9 of IBC: The Respondent No. 1, an Operational Creditor, filed an application under Section 9 of the IBC before the Adjudicating Authority (National Company Law Tribunal, Cuttack Bench) against the Corporate Debtor, which was admitted on 27th September 2019. The Adjudicating Authority declared a moratorium under Section 14 of IBC and initiated the CIRP. 2. Interim Orders and their Compliance: Upon appeal, the Tribunal issued an interim order on 23rd October 2019, directing the Interim Resolution Professional (IRP) not to constitute the Committee of Creditors (CoC) if not yet constituted. The IRP was instructed to ensure the company remained a going concern, with the Board of Directors and employees assisting. The bank account of the Corporate Debtor was allowed to be operated for day-to-day functioning only after the IRP's approval. 3. Violations of Sections 14, 17, and 19 of IBC: The IRP reported that the Directors of the Corporate Debtor made unauthorized withdrawals from the company's bank account, violating Sections 14, 17, and 19 of IBC. The IRP provided a list of transactions showing significant withdrawals made between 25th October 2019 and 15th November 2019, totaling ?4,54,73,285, without the IRP's approval. 4. Unauthorized Withdrawals by Directors: The IRP discovered that the Directors had made withdrawals even after the CIRP was initiated and during the interim order period. The IRP filed an application (I.A. No. 3878/2019) detailing these unauthorized transactions. The Tribunal noted that the Directors acted without involving the IRP, which was a serious violation of the Tribunal's orders and the IBC provisions. 5. Undertakings and their Non-compliance: The Directors, Manoj K. Daga and Deepak Daga, gave undertakings to return the withdrawn money within four weeks. However, they failed to comply with these undertakings. The Tribunal observed that the Directors' actions were not in good faith and that their requests for extensions were attempts to delay the process. 6. Contempt Proceedings Against Directors: The Tribunal found prima facie evidence of contempt against the Directors for willfully disobeying the orders of the Adjudicating Authority and the Tribunal. The Tribunal directed the Registry to register a contempt case against Manoj K. Daga and Deepak Daga, to be listed on 7th April 2020. 7. Continuation of CIRP: The Tribunal dismissed the appeal in default and permitted the IRP to continue the CIRP as per the IBC provisions. The IRP was authorized to examine the accounts and evidence, and present any violations to the Adjudicating Authority for appropriate action under Sections 70 and 74 of IBC. Conclusion: The Tribunal dismissed the appeal and directed the continuation of the CIRP. The IRP was allowed to take necessary actions to recover the unauthorized withdrawals and ensure compliance with the IBC provisions. The contempt proceedings against the Directors were initiated for their willful disobedience of the Tribunal's orders.
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