2021 (6) TMI 487 - Tri - Insolvency and Bankruptcy

Direction to Respondents to handover possession of the Vehicles to the Applicant as the assets of the Company - seeking direction that no third party interest be created over the said Vehicles - personal guarantees to the corporate debtor - HELD THAT - Admittedly, on the date of commencement of the Corporate Insolvency Resolution Process, the registration certificates of the vehicles are in the name of the Corporate Debtor - As per Section 14 of IBC, the Respondents are prohibited from enforcing any security on the assets of the company and as per Section 18 of the IBC, RP has to take control and custody of any assets over which the Corporate Debtor has ownership rights as recorded in the balance sheet of the Corporate Debtor. The Respondents, who are possessing the vehicles have to hand over the vehicles to the Applicant. Respondents have the liberty to file their claim before the RP for their dues - Application allowed.

Issues:
1. Application filed under Section 19 of the IBC for various prayers related to compliance and possession of assets.
2. Dispute over possession of vehicles owned by the Corporate Debtor during CIRP.
3. Allegations of non-compliance by the Respondents with the directions of the IRP.
4. Respondents' claim of entitlement to possess vehicles based on prior agreements and guarantees.
5. Interpretation of relevant provisions of the Insolvency and Bankruptcy Code (IBC) regarding ownership rights and control of assets during CIRP.

Analysis:

1. The Applicant filed an application under Section 19 of the IBC seeking orders for compliance, possession, and protection of assets. The Applicant, appointed as the IRP, highlighted the need for cooperation from the Respondents in managing the affairs of the Corporate Debtor, specifically regarding the possession of certain vehicles identified as assets of the Company.

2. The core issue revolved around the possession of vehicles that were part of the Corporate Debtor's assets during the Corporate Insolvency Resolution Process (CIRP). The Applicant, as the IRP, asserted the need for immediate possession of these vehicles, emphasizing their importance as recorded assets of the Company.

3. The Applicant alleged non-compliance by the Respondents in handing over possession of the vehicles despite multiple reminders and requests. The Respondents, in turn, denied the Applicant's claims, stating their lack of connection with the management of the Corporate Debtor and asserting their rights based on prior agreements and resignations from director positions.

4. The Respondents defended their possession of the vehicles, citing personal guarantees and contractual clauses entitling them to retain possession. They argued that decisions taken before the initiation of the insolvency process, including agreements with SKIL Group regarding the vehicles, remained binding on the Corporate Debtor and its management.

5. The Tribunal analyzed the provisions of the IBC, particularly Sections 14, 18, and 19, to determine the rights and obligations concerning ownership and control of assets during CIRP. It emphasized the RP's role in taking control and custody of assets owned by the Corporate Debtor, as recorded in its balance sheet, while prohibiting the enforcement of securities by the Respondents.

6. Ultimately, the Tribunal ruled in favor of the Applicant, directing the Respondents to hand over the vehicles to the IRP. The decision highlighted the importance of adhering to the provisions of the IBC during CIRP, ensuring the proper management and protection of the Corporate Debtor's assets. The Respondents were granted the opportunity to file their claims for dues before the RP, emphasizing the resolution process's procedural fairness and adherence to legal requirements.

7. The judgment underscored the significance of upholding the principles of insolvency law and the statutory framework of the IBC to facilitate the effective resolution of corporate insolvency cases. The decision to allow the Applicant's application and dispose of the matter without costs reflected the Tribunal's commitment to ensuring compliance with legal mandates and protecting the interests of all stakeholders involved in the insolvency resolution process.

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