2019 (3) TMI 2031 - Tri - Insolvency and Bankruptcy

Tribunal penalizes ex-directors and auditor for non-cooperation in insolvency case. Contempt notices issued.

The Tribunal imposed penalties of Rs. 10,00,000 each on ex-directors and a statutory auditor for non-cooperation in handing over control of the corporate ... Direction to hand over the property in question to the Resolution Professional - whether the said property belongs to the corporate debtor? - HELD THAT:- Since Mr Gaurav Dave and Vishal Dave, have intentionally avoided appearing in the court and his action is in complete disregard of the Court order. The notices under Contempt of Court Act have already been issued against them. However, despite that, they are avoiding to attend the court. Since contempt notices have been issued against Mr Garav Dave and Vishal, but they in violation of the Court order failed to appear in the court, therefore in ensuring their presence we are compelled to pass following order so that action may be taken against them under the Contempt of Court Act. At this moment, Mr Sandeep Shah, Statutory Auditor of the company directed to remain present in person in the Court on 15.4.2019. Advocate appearing on behalf of Mr Gaurav Dave is being directed to inform the statutory Auditor of the company for his presence on 15.4.2019. List on 15.4.2019 for the appearance of Mr Gaurav Dave, Mr Vishal Dave and Mr Sandeep Shah. Issues Involved:1. Non-cooperation by ex-directors and statutory auditor in handing over possession and control of the corporate debtor.2. Deliberate obstruction in the resolution process by the ex-directors.3. Penalties and legal consequences for non-compliance with court orders.4. Involvement of police assistance to enforce court orders.5. Freezing of bank accounts of ex-directors and statutory auditor.Detailed Analysis:1. Non-cooperation by ex-directors and statutory auditor in handing over possession and control of the corporate debtor:The Resolution Professional (RP) reported multiple instances of non-cooperation by the ex-directors, specifically Mr. Gaurav Dave, Mrs. Ami Dave, and Mr. Vishal Dave, as well as the statutory auditor, Mr. Sandeep Shah. Despite repeated attempts, the RP was unable to take possession of the corporate debtor’s registered office, corporate office, and factory land due to deliberate obstruction and lack of cooperation from the ex-directors. The RP's visits to these premises were met with various forms of resistance, including locked gates, removed company boards, and misleading information about the premises and assets.2. Deliberate obstruction in the resolution process by the ex-directors:The RP’s status report highlighted that the ex-directors continuously obstructed the resolution process. For instance, during visits to the registered office and corporate office, the ex-directors provided misleading information about the premises and refused to hand over keys or identify specific locations. The ex-directors also failed to provide statutory records and other necessary documents, claiming they were either produced before appellate authorities or not available. This obstruction was documented through video recordings and Panchanamas.3. Penalties and legal consequences for non-compliance with court orders:The Tribunal noted that the actions of the ex-directors and statutory auditor were in violation of Section 70 of the Insolvency and Bankruptcy Code (IBC), 2016. This section outlines punishments for misconduct during the corporate insolvency resolution process, including failure to disclose property details, deliver property and documents, and prevent production of relevant books or papers. Consequently, the Tribunal imposed a penalty of Rs. 10,00,000 each on Mr. Gaurav Dave, Mrs. Ami Dave, and Mr. Vishal Dave, to be paid before the next hearing date. The Tribunal also issued contempt notices due to their repeated non-compliance with court orders.4. Involvement of police assistance to enforce court orders:Given the persistent non-cooperation, the Tribunal directed the Police Commissioner of Ahmedabad to provide police assistance to the RP. This included deputing a police officer of Deputy Superintendent rank to help the RP take control and possession of the corporate debtor’s assets and premises. The Tribunal had previously issued similar directions for police assistance, which were reiterated in this order to ensure compliance.5. Freezing of bank accounts of ex-directors and statutory auditor:To enforce compliance, the Tribunal ordered the freezing of bank accounts belonging to Mr. Gaurav Dave, Mrs. Ami Dave, and Mr. Vishal Dave. This included both individual and joint accounts in any bank in India. The Indian Banks Association and Reserve Bank of India were directed to issue necessary instructions to all banks and confirm compliance within a week. This measure was taken to ensure that the ex-directors and statutory auditor could not evade financial accountability.Conclusion:The Tribunal's order emphasized the importance of cooperation in the corporate insolvency resolution process and the severe consequences of non-compliance. The ex-directors and statutory auditor were penalized and faced legal actions, including contempt proceedings and freezing of bank accounts, to enforce compliance and facilitate the RP’s efforts in taking control and custody of the corporate debtor’s assets. The involvement of police assistance underscored the Tribunal's commitment to ensuring that its orders were executed effectively.