Duty to extend cooperation to interim resolution professional [ Section 19 ] - Insolvency Resolution And Liquidation For Corporate Persons - IBC

Duty to extend cooperation to interim resolution professional In some cases, the promoters and directors of the Corporate debtor are reluctant to cooperate with the RP and his/ her team. Where the former management is influential, such reluctance can filter down to employee and worker groups. On some occasions, IRPs/RPs have not been granted access to the premises of the Corporate debtor and information has been kept from them. This can create a hostile environment for the Interim Resolution Professional (IRP)/Resolution professional (RP) to work in. Section 19 is an important tool in the hands of the Interim Resolution Professional (IRP)/Resolution professional (RP) in such circumstances. It sets out a statutory mandate for cooperation with the Interim Resolution Professional (IRP)/Resolution professional (RP). It states that the personnel of the Corporate debtor, its promoters, or any other person associated with its management shall extend all assistance and cooperation to the Interim Resolution Professional (IRP)/Resolution professional (RP) as may be required by him/her in managing the affairs of the Corporate Debtor. Officials of Corporate Debtor to Cooperatie IRP [ Section 19(1) ] 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. IRP to seek directions to AA if officials of Corporate Debtor do not cooperate [ Section 19(2) ] Where any personnel of the corporate debtor, its promoter or any other person required to assist or cooperate with the interim resolution professional does not assist or cooperate, the interim resolution professional may make an application to the Adjudicating Authority for necessary directions. AA to direct officials of CD [ Section 19(3) ] The Adjudicating Authority, on receiving an application under section 19(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. Where a person who does not cooperate with the Interim Resolution Professional (IRP)/Resolution professional (RP), the IBBI and the Central Government are empowered under section 236 of the IBC to prosecute them. Further, under regulation 30 of the CIRP Regulations, the IRP or RP can make an application to the Adjudicating Authority for an order seeking the assistance of the local district administration in discharging their duties under the IBC or CIRP Regulations. In addition, section 429 of the Companies Act, 2013, provides that the NCLT can, in any proceedings under the IBC, in order to take into custody or under its control all property, books of account, or other documents, request, in writing, the Chief Metropolitan Magistrate, Chief Judicial Magistrate, or the District Collector within whose jurisdiction any such property, books of account, or other documents of the corporate person are situated or found, to take possession of them. On such a request being made, the Chief Metropolitan Magistrate, Chief Judicial Magistrate, or the District Collector, shall take possession of such property, books of account, or other documents and entrust them to the NCLT or other persons authorized by it. In many cases, the Adjudicating Authority has passed orders under this section, directing the relevant authorities to assist the Interim Resolution Professional (IRP)/Resolution professional (RP) in taking possession of the assets or documents of the Corporate Debtor. Relevant Case Laws In Syndicate Bank Vs. Him Steel Private Limited [Company Petition (IB) 494 (PB)/2019] The RP filed an application under section 19(2) of the IBC as the promoters and directors of the Corporate debtor were not inclined to provide the records of the Corporate Debtor. The Adjudicating authority, exercising its jurisdiction provided under section 429 of the Companies Act, 2013, directed the police commissioner of the area to provide assistance to the RP in extracting records from the promoters and directors of the Corporate debtor. In Ajay Kumar Vs. Shree Sai Industries Private Limited and Another [Company Appeal (AT) (Insolvency) No. 616 of 2019] The RP submitted to the NCLAT that he was unable to take effective control of the Corporate Debtor due to lack of cooperation from the promoters of the Corporate debtor, due to which an order of liquidation had to be passed against the Corporate debtor. The NCLAT, while setting aside the liquidation order, held that the CIRP of the Corporate debtor would proceed from the stage of preparation of the IM. The NCLAT also held that if the promoters continued to not cooperate with the RP in handing over the necessary documents and information, the AA would obtain the assistance of the Superintendent of Police of the concerned area to ensure that the possession of the Corporate Debtor and all necessary records are handed over to the RP.