2017 (10) TMI 619 - Tri - Insolvency and Bankruptcy

Tribunal Upholds Interim Resolution Professional's Authority; Emphasizes Continued Role Post-Appointment

The Tribunal upheld the Interim Resolution Professional's (IRP) authority and actions, dismissing the application to annul the IRP's appointment. It ... Insolvency and Bankruptcy procedure - non-co-operative attitude of the key managerial personnel of the Corporate Debtor - Held that:- The facts discussed above would also make it quite clear that there has not been proper monitoring by the Regional Office of Canara Bank holding major voting share in the committee of creditors and when the continuation of interim resolution professional was not accepted, application was supposed to have been filed in terms of sub-section (3) of Section 22 of the Code for replacement of the IRP. In view of the above, the following directions are issued:- (i) Notice be issued to the Chief Manager, Canara Bank and the Chief Manager, Bank of Maharashtra to appear in person on 25.09.2017 and to show cause as to why an application has not been made so far for replacement of the IRP in terms of Section 22 of the Code. (ii) Notice also to the Regional Manager, Canara Bank. Chandigarh to file a report before 25.09.2017 as to why the proper monitoring of the sensitive matter like the resolution process under the I.B. Code. 2016 is not being done. (iii) Notice to Mr. R.K. Kapoor, Chartered Accountant, C/o R.K. Kapoor & company, the statutory auditors of the company to appear in person on 25.9.2017 and to file an affidavit explaining the circumstances as to why the statutory record has not been handed over to the IRP and to show cause as to why the proceedings for violation of the directions of this Tribunal while appointing Interim Resolution Professional be not initiated. (iv) Notice to the Intervener Mr. Ashwani Kumar Prabhakar, the Director of the Corporate Debtor to file his affidavit and to appear in person on 25.09.2017 to show cause as to why action be not initiated for not complying with the instructions of the Interim Resolution Professional in the collection of information and handing over management of the Corporate Debtor. (v) Commissioner of Police, Ludhiana to provide necessary police protection/assistance to Mr. Anil Kumar, Interim Resolution Professional in the performance of his functions, as and when Mr Anil Kumar makes a request to the police department in the discharge of his duties. Issues Involved:1. Non-cooperation of the personnel of the Corporate Debtor.2. Validity of the Interim Resolution Professional’s (IRP) actions post the expiry of his term.3. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016.4. Allegations of illegal actions by the IRP.5. Publication of advertisements in widely circulated newspapers.6. Appointment of a valuer previously dis-empanelled by a bank.7. Directions for police protection and assistance.Detailed Analysis:1. Non-cooperation of the personnel of the Corporate Debtor:The IRP faced significant non-cooperation from the personnel of the Corporate Debtor. Despite multiple visits and requests, the personnel, including the Director (R-2) and a Consultant Chartered Accountant, failed to provide necessary documents, access to books of accounts, or control over the premises. The premises were found devoid of any plant and machinery, spare parts, or records, indicating a deliberate attempt to obstruct the IRP’s duties. The Tribunal noted the non-cooperative attitude of the key managerial personnel, which hindered the IRP's performance of his time-bound duties.2. Validity of the IRP’s actions post the expiry of his term:The primary issue was whether the IRP could continue functioning after the expiry of his 30-day term. The Tribunal held that the IRP does not become functus officio (having no further official authority) merely because his initial term expired. The Tribunal emphasized that the insolvency process must continue seamlessly to meet the statutory deadlines, and the IRP would continue to function until replaced by a Resolution Professional (RP) as per the Code. The Tribunal referenced the Hon'ble Company Law Appellate Board’s decision in JK Jute Mills Company Limited Vs. M/s Surendra Trading Company, which clarified that the IRP’s duties are not mandatory but directory, ensuring the continuity of the resolution process.3. Compliance with procedural requirements under the IBC:The IRP complied with the procedural requirements by filing the report certifying the constitution of the Committee of Creditors (CoC) within the stipulated 30 days and scheduling the first CoC meeting. However, the meeting was delayed due to non-cooperation from Canara Bank, the lead financial creditor. The Tribunal found that the IRP acted in accordance with the regulations despite the challenges and non-cooperation from the financial creditors.4. Allegations of illegal actions by the IRP:The respondents alleged that the IRP acted beyond his jurisdiction by attempting to lock the premises and requesting information for the past four financial years. The Tribunal dismissed these allegations, stating that the IRP was within his rights to secure the assets and request necessary information. The Tribunal noted that the Corporate Debtor failed to provide even the financial statements for the last two years, which were essential for the resolution process.5. Publication of advertisements in widely circulated newspapers:The respondents contended that the IRP did not publish the required advertisements in newspapers with wide circulation in the locality of the Corporate Debtor. The Tribunal rejected this argument, stating that the IRP made reasonable efforts by publishing in 'Business Standard' and 'Rozana Spokesman,' which have significant circulation. The Tribunal emphasized that the intervener had no locus standi to challenge the publication's adequacy given his non-cooperative behavior.6. Appointment of a valuer previously dis-empanelled by a bank:The intervener argued against the appointment of a valuer dis-empanelled by the State Bank of India. The Tribunal found this contention without merit, noting that the valuer was empanelled with other banks and financial institutions. The Tribunal stated that dissatisfaction with the valuer's report could be addressed by the CoC, but it was not a ground to impede the IRP's functioning.7. Directions for police protection and assistance:The Tribunal issued directions for police protection to the IRP to ensure he could perform his duties without interference. The Tribunal also issued notices to the Chief Managers of Canara Bank and Bank of Maharashtra, the Regional Manager of Canara Bank, and the statutory auditors to explain their non-cooperation and failure to comply with the Tribunal's directions.Conclusion:The Tribunal dismissed the application to annul the IRP's appointment and upheld the IRP's actions and authority. The Tribunal directed the necessary parties to cooperate with the IRP and provided for police protection to facilitate the resolution process. The Tribunal also emphasized the importance of seamless continuation of the insolvency process and the IRP's role until a Resolution Professional is appointed.