2022 (3) TMI 945 - Tri - Insolvency and Bankruptcy

Seeking for a direction to cooperate and assist the Resolution Professional in conducting the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor - Section 19(2) and 60(5) of Insolvency and Bankruptcy Code, 2016 - HELD THAT - The Applicant is appointed and he has initiated the CIRP and the said process is a time bound one. On an assumption that if the order initiating the CIRP is recalled, this Application would become infructuous, the CIRP process cannot be hurdled by the non-cooperation of the Respondents. Section 19(1) of IBC, 2016, mandates that, the Personnel of the Corporate Debtor, its Promoters or any other person associated with the management of the Corporate Debtor shall extend all assistance and cooperation to the interim resolution professional as may be required by him in managing the affairs of the Corporate Debtor - Section 19(3) of the IBC, 2016 mandates that, the Adjudicating Authority, on receiving an application under sub-section (2), shall by an order, direct such personnel or other person to comply with the instructions of the Resolution Professional and to cooperate with him in collection of information and management of the Corporate Debtor. It is evident that there is a non-cooperation on the part of the Respondents to the Applicant. The reasons mentioned in the counter are not sufficient to dismiss the application. The contention that they have not received the documents from the earlier management inspite of they coming into management w.e.f. 01.06.2021 is not found to be tenable - there shall be direction to all the respondents to cooperate with the Applicant and provide all the information/documents/clarifications as and when required till the completion of the CIRP period including books of accounts for the smooth running of CIRP process of the Corporate Debtor. Application allowed in part.

Summary

Issues:
Application under Section 19(2) and 60(5) of Insolvency and Bankruptcy Code, 2016 seeking cooperation from Suspended Directors for Corporate Insolvency Resolution Process (CIRP).

Analysis:
1. Background and Application Details:
The Resolution Professional filed an application against the Suspended Directors of the Corporate Debtor seeking cooperation for the CIRP under Sections 19(2) and 60(5) of the Insolvency and Bankruptcy Code, 2016. The Applicant took over as Interim Resolution Professional and initiated the CIRP process, requesting necessary information from the Respondents.

2. Non-Cooperation Allegations:
The Respondents failed to provide essential information despite requests, hindering the CIRP progress. The valuers couldn't complete the Information Memorandum due to the absence of signed provisional financials. The lack of cooperation from the Suspended Board of Directors was impeding the CIRP process.

3. Respondents' Counter and Arguments:
The Respondents contended that they were the new management and were in transition when the CIRP was initiated. They filed a Recall Petition for the ex-parte order dated 25.11.2021, seeking dismissal of the Application based on pending proceedings.

4. Judgment and Legal Mandates:
The Tribunal noted the time-bound nature of the CIRP and emphasized the obligation of all personnel associated with the Corporate Debtor to cooperate with the Resolution Professional as per Sections 19(1) and 19(3) of the IBC, 2016. Despite the pending Recall Petition, non-cooperation from the Respondents could not impede the CIRP process.

5. Decision and Direction:
The Tribunal found the reasons provided by the Respondents insufficient to dismiss the application. Consequently, the Application was partly allowed, directing all Respondents to cooperate with the Resolution Professional, provide necessary information, documents, and clarifications for the smooth progress of the CIRP until its completion, including sharing books of accounts.

This detailed analysis highlights the legal proceedings, arguments, and the Tribunal's decision regarding the cooperation required from the Suspended Directors for the successful conduct of the Corporate Insolvency Resolution Process.