9911796707
TMI Blog2024 (9) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 (hereinafter referred to as 'IBC') filed by PR International initiating Corporate Insolvency Resolution Process (CIRP) against GTHS Retails Pvt. Limited (Corporate Debtor). b) The Petitioner was appointed as an Interim Resolution Professional (IRP) and vide Order dated 20.12.2017, the Adjudicating Authority confirmed and appointed the Petitioner as the Resolution Professional. c) Vide Order dated 04.07.2019, the Adjudicating Authority took note of the fact as informed by the Petitioner that the period of 270 days within which CIRP needs to be completed has come to an end and also the Resolution Applicant has withdrawn his offer and therefore the only option left was to proceed towards Liquidation. The Liquidation process against the Corporate Debtor was initiated. d) On 16.10.2019, Mr. Ramit Rastogi was appointed as the Liquidator and the Petitioner herein was discharged from this case. e) The Liquidator filed an application being IA/3719/2020 before the Adjudicating Authority seeking directions to the suspended ex-Directors of the Corporate Debtor to furnish the information and documents as prayed by him in the application. However, the said application was withdrawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y file any application for realisation of the assets/debt of the Corporate Debtor. Let notice be issued to the IRP/RP as well as the Liquidator to remain personally present before this Tribunal on the next date of hearing. Simultaneously, RoC is also directed to file a detailed report in the matter. Copy of the Compliance report and the valuation report filed before this Tribunal be sent to the RoC by the Applicant as well as by the Registry. The matter be adjourned for the report of RoC as well as explanation of the IRP/ RP and Liquidator. Ld. Counsel for the Liquidator is directed inform all of them. List on 05.09.2022." i) In compliance with the aforesaid order, the Petitioner filed his reply dated 29.10.2022 to the queries sought for by the Adjudicating Authority. The Adjudicating Authority Vide Order dated 17.01.2023 also sought a report from the IBBI regarding the doubts as raised in the order dated 15.07.2022. j) Thereafter, on 25.04.2023, a notice of investigation under Regulation 8 (1) of the Insolvency & Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017 (hereinafter referred to as the 'Inspection Regulations') was issued to the Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company's premises as was required by him in terms of the Liquidation Process Regulations. o) It is further stated that when the Liquidator was given complete possession of the Corporate Debtor on 12.09.2019, the Corporate Debtor was a going concern and all the records/documents were at the premises only. It is also stated that complete set of all the documents were handed over to the Liquidator by 07.11.2019 and the Liquidator had himself acknowledged the receipt of all the documents vide e-mail dated 20.09.2020. p) The investigation report was filed by the Investigating Authority to the IBBI wherein it was stated that AGM(MM) was directed to conduct investigation in the matter of GTHS Retails Pvt. Limited and accordingly a notice under Section 8 (1) of the Inspection Regulations was issued to the Petitioner as well as the Liquidator. The Investigating Authority after considering the submissions made by the Petitioner observed as under:- "iii) IA's Observation It has been observed that as per balance sheet for the year 2017-2018, security deposits as on 31.03.2018 amounted to Rs. 53,43,668. However, the same reduced to Rs. 15,000/- as per the balance sheet of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure VIII. RP further failed to realise the WIP amounting to Rs.79.54 lakhs lying with various petty job workers as shown in the books of the CD as on 03.08.2017 i.e., the Insolvency Commencement Date (ICD). Section 25 (2) (b) of the Insolvency and Bankruptcy Code (hereinafter referred to as 'the Code') states that the RP has the duty to represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings. RP was under the duty to approach the AA with regards to any directions relating to the realization of security deposits advanced to various franchise and the WIP lying with various petty workers. However, RP failed to take any steps towards realization of the said security deposits paid to various franchise. Further, Mr. Ramit Rastogi was appointed as liquidator vide order dated 16.10.2019. In the preliminary report filed with AA and the 3rd progress report was well as in his reply liquidator mentioned that Mr. Harsh Manchanda (suspended ex director) transferred amounts of Rs.50,480 and Rs. 61,104 aggregating to Rs.1.11 lacs to his personal SBI account from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Date of Submission Delay (in days) CIRP Form 1 30/09/2019* 17/11/2020 414 CIRP Form 3 30/09/2019* 17/10/2019 11 CIRP Form 5 30/09/2019* 11/10/2019 11 * In the IBBI circular dated 14th August 2019, it is mentioned that all Forms which became due on or before 15th September had to be submitted by 30th September 2019. The relevant extract is as follows "It is directed that an IP shall file electronically- a. the Forms along with relevant information and records, which have become due on or before 15th September, 2019 in respect of all CIRPs, both closed and ongoing, conducted by him, by 30th September, 2019: and b. the Forms along with relevant information and records, which will become due on or after 16th September, 2019 in respect of CIRPs conducted by him, by the timelines as specified in the Table under Para 7 above. iv) In view of the above, Mr. Sandeep Kumar Bhatt, RP violated Section 25 (1), 25 (2) (a), 25 (2) (b), 208 (2) (a), 208 (2) (e) of the Code, Reg. 7 (2) (h) of the IP Regulations read with Clause 14 of the Code of Conduct and the circular issued by the IBBI on 14th August 2019." q) The Investigating Authority after going through the rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IBC including cancellation of his registration shall not be taken against him. He was directed to submit his reply along with supporting material latest by 08.09.2023. s) The Petitioner vide letter dated 13.09.2023 replied to the Show Cause Notice stating that Petitioner has always worked in compliance of the provisions of the IBC and has taken precautions to preserve and protect the assets and continue the business operations of the corporate debtor. The Petitioner also stated that he had represented and acted on behalf of the corporate debtor in exercising rights of the corporate debtor in judicial, quasi judicial and arbitration proceedings and hence was in compliance of Section 25 (2) (b) of IBC. Petitioner also accepted the fact that he has filed the CIRP Forms 3 & 5 with delay of 11 days and prayed for condonation of such delay as it was the early era of IBC and there were several doubts about the procedure. The Petitioner also stated in his reply that he has maintained the integrity of his position by being honest, straight forward and forthright in his work and he is not involved in any action that would bring disrepute to the profession. The Petitioner also filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid of merits, and passed without considering the facts and evidence placed by the Petitioner. It is also stated that the principle of natural justice on which our judicial system is based upon was not at all followed as the Petitioner was not informed about any incriminating documents relied upon by the Disciplinary Committee while passing the impugned Order. It is further stated that the Disciplinary Committee which heard the case of the Petitioner and even requested the Petitioner to file certain documents was not the Disciplinary Committee that passed the impugned Order. 4. It is further contended by the learned Counsel for the Petitioner that the Respondents have failed to show whether the investigation report prepared by the Investigating Authority was accepted by the Disciplinary Committee and whether the Investigating Authority was duly appointed to conduct an investigation on the Petitioner. It is also stated that only one-member Disciplinary Committee passed the impugned Order against the Petitioner and a perusal of Section 220(1) of the IBC shows that the Disciplinary Committee shall comprise of at least two members and one of such members must be a whole time member. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Authority submitted under sub-section (6) of section 218: Provided that the members of the disciplinary committee shall consist of whole-time members of the Board only. (2) On the examination of the report of the Investigating Authority, if the disciplinary committee is satisfied that sufficient cause exists, it may impose penalty1 as specified in sub-section (3) or suspend or cancel the registration of the insolvency professional or, suspend or cancel the registration of insolvency professional agency or information utility as the case may be. (3) Where any insolvency professional agency or insolvency professional or an information utility has contravened any provision of this Code or rules or regulations made thereunder, the disciplinary committee may impose penalty which shall be- (i) three times the amount of the loss caused, or likely to have been caused, to persons concerned on account of such contravention; or (ii) three times the amount of the unlawful gain made on account of such contravention, whichever is higher: Provided that where such loss or unlawful gain is not quantifiable, the total amount of the penalty imposed shall not exceed more than one cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the responsibility of the Resolution Professional to manage the affairs of the corporate debtor as a going concern during corporate insolvency resolution process and to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans, and to collect, collate and finally admit claims of all creditors, which must be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated by the Committee of Creditors. The role of the Resolution Professional is not adjudicatory but administrative and a Resolution Professional should not forget that their office is not an office of comfort but an onerous one for it is on their diligence and integrity, the successful working of the IBC rests. 12. A perusal of the records reveals that the Petitioner adjusted Rs. 1,51,64,091/-, Rs. 1,52,20,146/- and Rs. 18,28,668/- as rent payable against the security deposit on 03.08.2017, 31.03.2018 and 31.03.2019 respectively. However, such adjustments were not shown transparently in the yearly financial account. 13. Material on record shows that the Petitioner has failed to preserve the assets of the Corporate Debtor. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found to be illegal and invalid, the High Court while exercising its extraordinary jurisdiction thereunder can refuse to upset it with a view to doing substantial justice between the parties. Article 226 of the Constitution grants an extraordinary remedy, which is essentially discretionary, although founded on legal injury. It is perfectly open for the writ court, exercising this flexible power to pass such orders as public interest dictates & equity projects. The legal formulations cannot be enforced divorced from the realities of the fact situation of the case. While administering law, it is to be tempered with equity and if the equitable situation demands after setting right the legal formulations, not to take it to the logical end, the High Court would be failing in its duty if it does not notice equitable consideration and mould the final order in exercise of its extraordinary jurisdiction. Any other approach would render the High Court a normal court of appeal which it is not. 53. The essential features of a writ of certiorari, including a brief history, have been very exhaustively explained by B.K. Mukherjea, J. in T.C. Basappa v. T. Nagappa, AIR 1954 SC 440. The Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnan, AIR 1964 SC 477, P.B. Gajendragadkar, CJ., speaking for the Constitution Bench, placed the matter beyond any position of doubt by holding that a writ of certiorari can be issued for correcting errors of jurisdiction committed by inferior courts or tribunals. The observations of this Court in para 7 are worth taking note of: "7. The question about the limits of the jurisdiction of High Courts in issuing a writ of certiorari under Art. 226 has been frequently considered by this Court and the true legal position in that behalf is no longer in doubt. A writ of certiorari can be issued for correcting errors of jurisdiction committed by inferior courts or tribunals : these are cases where orders are passed by inferior courts or tribunals without jurisdiction, or is in excess of it, or as a result of failure to exercise jurisdiction. A writ can similarly be issued where in exercise of jurisdiction conferred on it, the Court or Tribunal acts illegally or improperly, as for instance, it decides a question without giving an opportunity to be heard to the party affected by the order, or where the procedure adopted in dealing with the dispute is opposed to principles of natural justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amath v. Ahmad Ishaque, AIR 1955 SC 233 occasioning failure of justice." 16. At this juncture, this Court deems it appropriate to delineate the scope of interference by Court exercising its powers of judicial review in respect of a challenge pertaining to a decision taken by the experts of the field. It has been observed consistently by the Supreme Court in a number of judgments that the Court may interfere in an administrative decision, if and only if the same is arbitrary, irrational, unreasonable, mala fide or biased. The Hon'ble Supreme Court in Tata Cellular v. Union of India, (1994) 6 SCC 651, has stated as follows: "70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in Judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. As laid down in the judgments cited above the courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give "fair play in the joints" to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer." (emphasis supplied) 19. From the aforestated judgments, it is clear that the scope of interference by way of judicial review in commercial matters is extremely limited and can only be justified when a case of arbitrariness, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of the forms by the Petitioner with the Board. Several instances of the failure on the part of the Petitioner have been found in failing to protect the assets of the company which are listed as under: A. Failure to preserve and protect the assets of the Corporate Debtors a) Dip in security Deposit given against rent of shops b) Recovery of Work-in-Progress (WIP) c) Failure to take control of the bank accounts of their Corporate Debtors B. Delay in submission of CIRP Forms with the Board C. Contravention of Sections 25 (1), 25 (2) (a), 25 (2) (b), 208 (2) (a) and (e) of IBC, Regulation 40B of the CIRP Regulations and Regulations 7 (2) (a) and (h) of the IP Regulations read with Clause 1, 2, 14 and 19 of the Code of Conduct 23. The Order of the Disciplinary Committee shows that the reply given by the Petitioner has been considered and all the aspects have been taken care of by the Board and the decision has been taken by the Board after following the due procedure. This Court has gone through the Orders of the Board and the material on record and is of the opinion that the procedure has been followed by the Board before passing the Order suspending the Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
