2022 (8) TMI 316 - Tri - Insolvency and Bankruptcy

Non co-operation from the Directors of the Corporate Debtor and the Directors - section 425 of the Companies Act, 2013 and Section 60(5) of the Insolvency and Bankruptcy Code, 2016 and Rule 11 of the NCLT Rules, 2016 - HELD THAT - On 15th February, 2022, when this Contempt Application was listed before this Adjudicating Authority, the Ld. Counsel for the respondent sought 10 days time to file reply and the matter was posted for hearing on 2nd March,2022. On 2nd March, 2022, it was recorded by this Bench that the respondents had handover some documents relating to the Corporate Debtor to the Liquidator and that these documents shall be examined by the Liquidator by the Liquidator and if any other documents are required from the respondents, the Liquidator will send an e-mail to the respondents for such handing over those documents to the Liquidator. The matter was then listed on 22nd March, 2022, the Respondents was present in court and they were directed to meet the Liquidator in the evening at 5 P.M. at his office and give an information required by the Liquidator and if there are any documents to be handed over to the Liquidator, the same can be handed over within two day - Finally the matter was posted on 28th March, 2022 both the suspended Directors were present when the Liquidator informed this Adjudicating Authority that the information given by the Respondents was not to the satisfaction of the Liquidator and that there is much more required to be given by the Contemnors. This Bench thought it proper to give another chance to provide all the information to the Liquidators within three days - the respondents are directed to go to the office of the Liquidator, the next date and handover whatever information they have to the Liquidator in the supervision of one independent person Mr. Rohit Kumar Keshari, Advocate who was appointed as Special Officer. The matter was thereafter posted for 7th April, 2022 - In view of the commitment of Mr. O.P.Pandey, one of the suspended Directors, was directed to hand over the aforesaid items, which he had assured to give but not given so far. Issue notice to the Respondents, namely, Om Prakash Pandey and Shri Prakash Pandey to appear before this Adjudicating Authority personally on 31/08/2022.

Summary

Issues Involved:
1. Non-cooperation of Directors with the Resolution Professional (RP) during the Corporate Insolvency Resolution Process (CIRP).
2. Violation of Tribunal orders by the Directors.
3. Request for punitive actions under Section 70 of the Insolvency and Bankruptcy Code (IBC), 2016.
4. Initiation of contempt proceedings against the Directors under Section 425 of the Companies Act, 2013, and Section 60(5) of the IBC, 2016.

Issue-wise Detailed Analysis:

1. Non-cooperation of Directors with the Resolution Professional (RP) during the CIRP:
The RP of Shree Ram Saw Mill Private Limited submitted that the Financial Creditor had filed a petition under section 7 of the IBC against the Corporate Debtor, which was admitted on 16th March 2020, and the RP was appointed as the Interim Resolution Professional. Despite multiple emails and visits to the Factory Office and Registered Office, the Directors did not provide the necessary information and documents related to the assets, finances, and operations of the Corporate Debtor. The RP had to file an application under Section 19 seeking directions upon the Directors to provide all the information and documents. The Tribunal passed directions on 7th October 2020 for the Directors to render all necessary support to the RP.

2. Violation of Tribunal orders by the Directors:
Despite the Tribunal's order dated 7th October 2020, the Directors did not comply and continued to delay providing the required documents. The RP reported non-compliance of the order on 5th November 2020, and the Tribunal directed the Directors to be present at the hearing scheduled on 30th December 2020. The Directors' actions were deemed a clear violation of section 70 of the IBC, leading to the filing of an application for punitive actions against them. The Tribunal noted the defiant attitude and delaying tactics of the Directors, which could frustrate the basic objective of the Code.

3. Request for punitive actions under Section 70 of the IBC, 2016:
The RP sought necessary punishment for the Directors under Section 70 of the IBC, which includes imprisonment for a term not less than three years but may extend to five years, or a fine not less than one lakh rupees but may extend to one crore rupees, or both, for deliberate non-cooperation and blatant disregard of the Tribunal's orders. The Tribunal observed that the Directors' inaction and disobedience amounted to misconduct under Section 70 of the IBC and prima facie appeared to be contempt of court.

4. Initiation of contempt proceedings against the Directors under Section 425 of the Companies Act, 2013, and Section 60(5) of the IBC, 2016:
The RP filed an application under Section 425 of the Companies Act, 2013, and Section 60(5) of the IBC, 2016, for initiating contempt proceedings against the Directors for willfully and deliberately disobeying the Tribunal's orders. The Tribunal issued several orders directing the Directors to hand over the necessary documents and cooperate with the RP. Despite assurances and repeated directions, the Directors failed to comply fully. The Tribunal noted the continuous, intentional, and deliberate non-cooperation by the Directors and decided to issue notices to the Directors to appear personally before the Tribunal.

Conclusion:
The Tribunal found that the Directors had failed to comply with its orders and had not provided the necessary documents and information to the RP. The Tribunal deemed it appropriate to issue notices to the Directors for their personal appearance to address the issue of contempt and consider further actions under Section 70 of the IBC for their non-cooperation and violation of Tribunal orders.