2021 (3) TMI 151 - AT - Insolvency and Bankruptcy

Seeking directions to the Key Personnel of the Corporate Debtor to provide cooperation for resumption of work by the Liquidator at the registered office of the Corporate Debtor - HELD THAT - Admittedly in the Application under Section 19(2) r/w Section 34(3) of the I B Code, the key personnel of the Corporate Debtor were arrayed as Respondent, and the Appellants and respondent no.3 were not arrayed as party. Thus, without giving any opportunity of hearing to the Appellants the impugned order 17.07.2020 was passed. It is also admitted fact that when the Appellants came to know about the order dated 17.07.2020 then the Appellant No. 1 filed an Application for clarification of the order dated 17.07.2020, but the Application has not been considered by the Adjudicating Authority and passed the impugned order dated 14.08.2020. In this Application it was prayed that a direction be issued against the Liquidator not to claim exclusive possession of the office premises as the premises used by other 20 companies as their head office and the liquidator has the right only to access the records and documents pertaining to the Corporate Debtor maintained in the office premises. The Learned Adjudicating Authority without considering the Application for clarification passed the impugned order dated 14.08.2020 on the Contempt Application - while considering the Contempt Application the Adjudicating Authority should have decided the Application for clarification. In the light of such admission, and the fact that office premises is used by other 20 Companies as their registered office, the direction of Adjudicating Authority to hand over the keys to the liquidator and in case the set of keys are not handed over to the liquidator, the liquidator is free to approach the Superintendent of Police to provide necessary help and protection to the liquidator in having the lock(s) broken and replaced with new lock(s) without any delay, is erroneous and not sustainable. It is clear that the Adjudicating Authority thought it proper that the matter requires a detailed hearing for an overall view of the situation - Adjudicating Authority is directed to consider the matter afresh and pass appropriate order as per law - Appeal allowed.

Summary

Issues Involved:
1. Cooperation of key personnel with the Liquidator.
2. Access to the registered office premises.
3. Contempt proceedings against non-cooperating parties.
4. Clarification on exclusive possession of office premises.
5. Procedural fairness in passing orders without hearing affected parties.

Issue-wise Detailed Analysis:

1. Cooperation of Key Personnel with the Liquidator:
The Liquidator, appointed in January 2018, faced significant hindrances in resuming work at the Corporate Debtor’s office due to non-cooperation from key personnel, who cited COVID-19 lockdown as the reason. The Liquidator filed an application under Sections 19(2) and 34(3) of the Insolvency and Bankruptcy Code (I&B Code), seeking various reliefs to ensure cooperation from key personnel for resumption of work.

2. Access to the Registered Office Premises:
The Adjudicating Authority, in its order dated 17.07.2020, directed the key personnel and the owner of the premises to hand over the keys to the Liquidator and ensure at least 20% of the staff assist the Liquidator. However, the premises were used by over 20 companies, raising concerns about the safety and security of their documents. The Liquidator clarified he did not seek exclusive possession but only access to the office premises.

3. Contempt Proceedings Against Non-Cooperating Parties:
Following non-compliance with the 17.07.2020 order, the Liquidator filed a contempt application against certain directors and key personnel, seeking show-cause notices and necessary orders to ensure compliance. The Adjudicating Authority issued a show-cause notice on 14.08.2020 and directed the handover of keys, failing which the Liquidator could seek police assistance.

4. Clarification on Exclusive Possession of Office Premises:
The Appellants filed an application for clarification, arguing that the Liquidator should not claim exclusive possession as the premises were used by multiple companies. This application was not considered before the contempt order was passed, leading to the argument that the Liquidator only needed access to the Corporate Debtor’s records, not exclusive possession.

5. Procedural Fairness in Passing Orders Without Hearing Affected Parties:
The Appellants contended that the orders dated 17.07.2020 and 14.08.2020 were passed without giving them an opportunity to be heard, as they were not arrayed as parties in the initial application. The appellate tribunal noted this procedural lapse and emphasized the necessity of hearing all affected parties before passing such orders.

Conclusion:
The appellate tribunal set aside the impugned orders dated 17.07.2020 and 14.08.2020, directing the Adjudicating Authority to consider the matter afresh with detailed hearings and appropriate orders as per law. The appeals were allowed, with no order as to costs.