2022 (4) TMI 75 - Tri - Insolvency and Bankruptcy

Violation of principles of natural justice - ex-parte order passed - it is contended by the Applicant that no notice was received by him regarding the intimation to be present for hearing - opportunity of hearing not provided - HELD THAT - It is clear from the provision of Section 19(2) of IBC that the Ex-Management shall be bound to co-operate with the Resolution Professional, enabling the Resolution Professional to carry out and complete the resolution process, which is time bound and in the event of non-1 cooperation by the Corporate Debtor, its promoters or any other person associated with the management of Corporate Debtor, the Resolution Professional is entitled to move the Tribunal and upon filing an Application by the Resolution Professional, the Tribunal is entitled to 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. In the case on hand, the minutes of CoC meeting dated 09.03.2021 categorically discloses that the Resolution Professional had brought to the notice of the members of CoC that information such as audited financial statements of Corporate Debtor for the years 2019, 2020 and provisional balance sheet as on the Insolvency Commencement date i.e. 18.01.2021 for preparation of Information Memorandum were not furnished and the Director of the Suspended Management Shri L.N. Sharma assured that he will arrange within 3 days. However, as there was no compliance, the CoC in its next meeting dated 14.06.2021, once again took up the same issue. Pursuant thereto, Shri L.N. Sharma, the Director of Ex-Management requested for two weeks' time to furnish all the details. But, once again he defaulted in complying his own undertaking, hence the issue of non-furnishing of the records once again came up before the CoC in its meeting dated 23.07.2021. The Director of the Corporate Debtor, though assured to deliver the relevant records to the IRP, never kept his undertaking. Thus, breach of sub-section (1) of Section 19 is as clear as crystal, as such it is certainly open to the IRP to make an application to the Adjudicating Authority for necessary directions. In the instant case, this Adjudicating Authority, having found proof of non-cooperation by the Ex-Management, without going into the allegations, placing reliance on sub-section (1) of Section (19), passed a direction to hand over all the records and papers to the IRP, enabling successful completion of CIRP within the timeline. In passing such an order, there is no violation of principles of natural justice - there is clear violation of mandatory duty cast upon the ex-management in terms of Section 19(1) of IBC. The Application stands dismissed.

Summary

Issues:
1. Setting aside an ex-parte order passed by the Tribunal in IA No. 326/2021.
2. Allegation of violation of principles of natural justice.
3. Compliance with directions to hand over documents to the Resolution Professional.
4. Jurisdiction of the Tribunal to direct local police assistance.
5. Timeliness of filing an appeal against the Tribunal's order.

Issue 1: Setting aside an ex-parte order
The Applicant, a promoter and shareholder of the Corporate Debtor, filed an application seeking to set aside an ex-parte order passed by the Tribunal in IA No. 326/2021. The Applicant argued that the order was passed without notice and violated principles of natural justice. The Respondent, the Resolution Professional, contended that the Applicant was duly served notice through email, and the Tribunal rightly disposed of the application due to the Applicant's non-appearance.

Issue 2: Allegation of violation of principles of natural justice
The Applicant claimed that the order passed ex-parte on 14.07.2021 was a violation of natural justice as he was not given an opportunity to be heard. However, the Resolution Professional argued that the Applicant had failed to cooperate despite assurances given in CoC meetings, leading to the necessity of filing IA No. 326/2021 under Section 19(2) of IBC.

Issue 3: Compliance with directions to hand over documents
The Tribunal considered the duty of the Ex-Management to cooperate with the Resolution Professional in the resolution process. The Resolution Professional had repeatedly requested the Applicant to provide necessary documents, but the Applicant failed to comply. The Tribunal, in accordance with Section 19(1) of IBC, directed the Ex-Management to hand over the required documents to ensure the successful completion of CIRP.

Issue 4: Jurisdiction of the Tribunal to direct local police assistance
The Applicant argued that the Tribunal had no jurisdiction to direct local police assistance to the Resolution Professional. However, the Tribunal found no violation of natural justice in its order and emphasized the mandatory duty of the Ex-Management to cooperate with the Resolution Professional, as per Section 19 of IBC.

Issue 5: Timeliness of filing an appeal against the Tribunal's order
The Resolution Professional contended that the appeal filed by the Applicant on 27.11.2021, against the order dated 14.07.2021, lacked validity as per Section 61(1) of IBC, which requires filing an appeal within one month of the Tribunal's order. The Resolution Professional urged the Tribunal to dismiss the application based on this ground.

In conclusion, the Tribunal dismissed the Applicant's application, emphasizing the duty of the Ex-Management to cooperate with the Resolution Professional for the successful resolution process. The Tribunal found no violation of natural justice in its order and imposed a cost of ?10,000 on the Applicant for filing the application, payable within 15 days.