2022 (12) TMI 1298 - AT - Insolvency and Bankruptcy

Seeking to intervene in the proceedings filed by the Liquidator of the Corporate Debtor - seeking clarification as to whether he is allowed to scrutinise and investigate the transactions executed by the Directors of the Corporate Debtor beyond two years prior to the date of ICD and also to see the relevant documents from the Promoters - HELD THAT - We do not find any illegality in the observation of the Learned Adjudicating Authority that there is no provision in the Code, with respect to impleadment of any Creditor apart from the Creditors who have triggered the CIRP. Needless to ad, the Appellant is at liberty to pursue other legal remedies, if so advised. Appeal dismissed.

Summary

Issues:
1. Impleadment of operational creditors in insolvency proceedings beyond those triggering CIRP.
2. Allegations of fraud by the suspended Board of Directors.
3. Appellant's claim as a necessary party due to being the largest creditor.
4. Legal precedents cited in support of contentions.
5. Scope of relief at an interlocutory stage.
6. Challenge of execution of an arbitral award before the Supreme Court.
7. Provision for impleadment of creditors in the Insolvency and Bankruptcy Code.
8. Dismissal of the appeal based on lack of provision for impleadment beyond CIRP-triggering creditors.

Issue 1: Impleadment of Operational Creditors
The appeal arose from the rejection of a plea by M/s. Vitol S.A. seeking to intervene in insolvency proceedings beyond the scope of operational creditors triggering CIRP. The Adjudicating Authority based its decision on the absence of a provision in the Insolvency and Bankruptcy Code, 2016 allowing such impleadment. The Appellant argued for impleadment due to alleged fraud by the suspended Board of Directors, supported by an international arbitration award and forensic audit findings. However, the Director's Counsel contended that the Appellant was neither a necessary nor proper party, and the Adjudicating Authority's rejection was justified.

Issue 2: Allegations of Fraud
The Appellant contended that the suspended Board of Directors committed fraud, citing an international arbitration award upheld by the Bombay High Court. They argued that being the largest creditor, they had vital knowledge of fraudulent activities, justifying their impleadment. Despite these claims, the Director's Counsel opposed the Appellant's relevance to the issues raised in the appeal, emphasizing the lack of provision in the Code for creditors beyond CIRP initiators to be impleaded.

Issue 3: Claim as a Necessary Party
The Appellant asserted themselves as a necessary party due to their significant creditor status and detailed knowledge of the alleged fraudulent activities. However, the Director's Counsel maintained that the Appellant's submissions were irrelevant to the appeal's core issues, and the Code did not permit impleadment beyond specific operational creditors initiating CIRP.

Issue 4: Legal Precedents
The Appellant relied on various legal judgments to support their arguments, including cases like 'The State of Andhra Pradesh & Anr.' Vs. 'T. Suryachandra Rao' and 'Phoenix Arc Pvt. Ltd.' Vs. 'Spade Financial Services Ltd. & Ors.' The citations aimed to strengthen the Appellant's position regarding fraud and impleadment, but the Tribunal did not find it necessary to delve into these judgments extensively.

Issue 5: Scope of Relief at Interlocutory Stage
Respondents 3, 4, 6 & 8 highlighted that the Supreme Court had consistently restricted the grant of relief beyond the main suit at an interlocutory stage. This argument emphasized the limited scope of relief that could be sought during the ongoing proceedings.

Issue 6: Challenge of Arbitral Award
The execution of an arbitral award in favor of Vitol S.A. was challenged before the Supreme Court through Civil Appeal No. 5694/2018. This challenge added a layer of complexity to the case, indicating ongoing legal disputes related to the matter.

Issue 7: Provision in the Insolvency and Bankruptcy Code
The Tribunal affirmed the absence of a provision in the Code for impleading creditors beyond those initiating CIRP. It suggested that the Appellant could explore alternative legal remedies if desired, indicating that the current provisions did not support the Appellant's plea for impleadment.

Issue 8: Dismissal of the Appeal
Ultimately, the Tribunal dismissed the appeal, citing the lack of provision for impleadment of creditors beyond CIRP initiators. The decision was made without delving deeply into the Appellant's arguments regarding fraud and forgery, leading to the dismissal of the appeal without costs.