Directors' Unauthorized Withdrawals Prompt Legal Action: Compliance Required or Face Contempt

The judgment addresses the unauthorized withdrawals made by Directors of a Corporate Debtor without the approval of the Interim Resolution Professional, leading to the addition of a Director as a Respondent in the Application. The Directors are directed to provide a Reply regarding the withdrawals, failing which Section 74 of the Insolvency and Bankruptcy Code may be invoked, and contempt proceedings initiated. The Order is modified to restrict cheque issuance approval to the IRP, aiming to prevent unauthorized transactions. The Appeal and related application are scheduled for a simultaneous hearing on 17th December, 2019, with responses due by 16th December, 2019.

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Issues:
1. Violation of orders by Directors of Corporate Debtor regarding withdrawals without approval of IRP.
2. Addition of Deepak K. Daga as a Respondent in the Application.
3. Requirement of Reply from Appellant and Deepak Daga regarding withdrawals.
4. Consideration of invoking Section 74 of IBC and contempt proceedings against Directors.
5. Modification of the Order dated 23rd October, 2019 regarding cheque issuance approval process.
6. Hearing of Appeal and IA No.3878/2019 together on 17th December, 2019.

Analysis:
1. The judgment addresses the issue of Directors of the Corporate Debtor making withdrawals without the prior approval of the Interim Resolution Professional (IRP), violating the Orders dated 23rd October, 2019. The IRP raised concerns about significant cash withdrawals totaling &8377; 4,54,73,285 from the Vijaya Bank account without proper authorization. The Counsel for Appellant highlighted that the withdrawals were made by Deepak K. Daga, another Director, without IRP approval, leading to the decision to add Deepak K. Daga as a Respondent in the Application.

2. The judgment requires the Appellant and Deepak K. Daga to file a Reply regarding the unauthorized withdrawals. Directors are warned that failure to demonstrate prior approvals for the withdrawals would be considered a serious offense. Additionally, if the Directors cannot provide evidence of prior approval, they are directed to explain why Section 74 of the Insolvency and Bankruptcy Code (IBC) should not be invoked, and why contempt proceedings should not be initiated against them.

3. The Order dated 23rd October, 2019, is modified by the Tribunal to specify that the person authorized to sign bank cheques can prepare and sign cheques only after approval of the IRP. Furthermore, the cheques can only be operated or issued through the hands of the Resolution Professional. This modification aims to ensure stricter control over financial transactions to prevent unauthorized withdrawals and maintain the company as a going concern.

4. The judgment schedules the hearing of the Appeal and IA No.3878/2019 together on 17th December, 2019, indicating that both the appeal and the application filed by the IRP will be considered simultaneously. The Appellant and Deepak K. Daga are required to file their Reply by 16th December, 2019, in preparation for the upcoming hearing.

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