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TMI Blog2021 (3) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the corporate debtor, the effect of such a declaration is to interdict and conflict with the functioning of the resolution professional within the scope of the IBC. Thus, the continuance of proceedings for declaration of Wilful Defaulter in respect of the borrowing company must be construed to fall within the purview of the moratorium provided in Section 14 of the IBC. The Directors of the company, however, stand on a different footing - Section 17(1) clearly provides that the management of the affairs of the corporate debtor shall vest in the interim resolution professional and the powers of the Board of Directors of the said debtor shall stand suspended and be exercised by the interim resolution professional. The scope of functioning of the interim resolution professionals are clearly laid down in Sections 17, 18 and 20 of the IBC. The Directors are shut out from having any role in the functioning of the corporate debtor-company from the inception of the CIRP. As such, the present petitioners, in the capacity of Directors of the borrower company, cannot interfere in the functioning of the company at all. On the other hand, the steps taken against the Directors, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee of the petitioners. At the behest of the respondent no.1- bank, forensic audit was carried out into the affairs of the company in April, 2019. Pursuant to the forensic report placed before the members of the joint lenders meeting held on May 10, 2019, the respondent no.1 declared the account of the company as a No Fraud Account . 2. Subsequently, the company forwarded an One-Time Settlement proposal, which was accepted by the respondent no.1-bank. 3. In the interregnum, Corporate Insolvency Resolution Process (CIRP) was commenced in respect of the company by an order dated October 1, 2019 passed by the National Company Law Tribunal, Kolkata Bench. 4. During pendency of the CIRP, respondent no.1 issued a notice on November 4, 2019 calling upon the company and the petitioners to showcause and make submissions in writing within 30 days from the date of receipt of the letter as to why their names should not be included in the list of Wilful Defaulters as per the relevant Reserve Bank of India (RBI) guidelines. 5. The petitioners replied to such notice. Subsequently, several letters were issued to the petitioners as well as the company, asking the petitioners and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letters issued to the petitioners. It is argued that all points taken in the writ petition can very well be contended by the petitioners before the Identification Committee itself and the writ petition is, thus, not maintainable. 11. That apart, learned counsel for the respondent no.1 argues, the RBI guidelines dated July 1, 2015, read with Section 14 of the IBC, do not envisage any moratorium against the Directors of a company. 12. Learned counsel further argues that the IBC was enacted after the RBI guidelines were issued in 2015 and the provisions of the IBC are in addition to, and not in derogation of, the RBI guidelines. It is submitted that the two complement each other and do not operate in mutual contradiction. 13. Upon hearing learned counsel for both sides, it is relevant to look into the scope of the relevant provisions of the IBC vis- -vis the RBI guidelines dated July 1, 2015. 14. Section 14 of the IBC lays down provisions regarding moratorium and cover, inter alia, the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , financial institutions etc. for floating new ventures for a period of five years from the date of removal of their names from the list of Wilful Defaulters. Legal process against the borrowers/guarantors and foreclosure for recovery of dues should be initiated expeditiously under the said clause. Other financial measures are also contemplated therein. 19. Clause 4.1 of the 2015 guidelines mention the JPC recommendations regarding criminal action against the Wilful Defaulters, which also includes close monitoring of the end-use of funds. In Clause 4.2(i), such monitoring of the end-use of funds has been elaborated further. 20. The purpose of the Master Circular containing the RBI guidelines of 2015, as mentioned therein, is to put in place a system to disseminate credit information pertaining to Wilful Defaulters for cautioning banks and financial institutions so as to ensure that further bank finance is not made available to them. 21. Thus, it is evident from the aforesaid provisions of the 2015 Circular that the measures contemplated therein will have a direct detrimental effect on the scope of functioning of the resolution professional as envisaged under the IBC. 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such proceedings against the unit itself are arrested, may seem at the first blush, the same has an inherent fallacy. 27. Section 14 of the IBC contemplates a moratorium in respect of all proceedings against the corporate debtor, for the obvious reason that the continuance of other proceedings may lead to conflicting decisions vis- vis the management of the corporate debtor by the resolution professional. However, such immunity cannot be extended to Directors in view of their interference with the affairs of the company being negated by the provisions of the IBC itself during CIRP. 28. Hence, whatever may be the consequence of declaration of the Directors, even in the capacity of Directors of the company, as Wilful Defaulters, the same does not interfere with the CIRP in any manner in view of the prior dissociation of the Directors from the affairs of the company at the commencement of the CIRP. 29. Thus, the petitioners cannot claim immunity under Section 14 of the IBC, being not covered by the moratorium contemplated therein, although the company itself is covered by such moratorium for the reasons discussed above. 30. That apart, although neither the show-cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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