Dismissal of Director's Application for Removal of Resolution Professional Under I&B Code Sparks Contempt Proceedings

The National Company Law Tribunal, New Delhi Bench, dismissed the application for removal of the Resolution Professional/Liquidator under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority highlighted the Directors' non-cooperation and initiated contempt proceedings against them, leading to the dismissal of subsequent applications challenging the Authority's decisions. The Court emphasized the Directors' lack of standing to file applications on behalf of others and noted the ongoing non-cooperation. The Appellant was permitted to raise issues before the Adjudicating Authority for potential penal actions under the Companies Act and the I&B Code, with the appeal being dismissed without costs.

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Issues:
Application for removal of Resolution Professional/Liquidator under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (I&B Code) r/w Rule 11 of the NCLT.

Analysis:
The Appellant, a Director of M/s Mega Soft Infrastructure Pvt. Ltd., filed an application seeking the removal of the Resolution Professional/Liquidator, Mr. Abhishek Anand, under Section 60(5) of the I&B Code. The Adjudicating Authority, the National Company Law Tribunal, New Delhi Bench, rejected this application on 2nd May 2019. The grounds for seeking removal included allegations of non-cooperation by the Appellant/Directors with the Resolution Professional/Liquidator. It was claimed that the Ex-Directors of the Corporate Debtors willfully disobeyed cooperation directives and withheld crucial property title deeds, which were later revealed. The Resolution Professional invoked powers under Section 425 of the Companies Act, 2013, along with Sections 70 and 72 of the I&B Code, citing non-compliance by the Directors.

The Adjudicating Authority initiated contempt proceedings against the Appellant and other Directors due to their lack of cooperation, leading to non-bailable warrants being issued. Subsequently, two applications were filed by the Ex-Directors, including the Appellant, which were dismissed. One application sought to recall the non-bailable warrants, while the other questioned the Adjudicating Authority's functioning. The Adjudicating Authority dismissed both applications, highlighting the Directors' conduct and reluctance to assist in the proceedings. The Court emphasized that the Ex-Directors had no standing to file applications on behalf of others.

During the proceedings, it was revealed that a forensic audit had been conducted, and the report was shared with the Ex-Directors, including the Appellant. The Appellant's legal counsel argued that the Directors had cooperated with the Resolution Professional, who was uncooperative in return. However, the Court refrained from making any determination regarding the removal of the Resolution Professional/Liquidator or the handover of documents. The Court noted the ongoing non-cooperation by the Appellant with the Resolution Professional/Liquidator and the initiation of contempt proceedings. Consequently, the Appellant was allowed to raise all issues before the Adjudicating Authority, which would decide on potential penal actions under the Companies Act and the I&B Code. The Appeal was dismissed with these observations, and no costs were awarded.

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