2020 (9) TMI 436 - Tri - Insolvency and Bankruptcy

Suspended directors violated moratorium rules, directed to refund amounts promptly.

Oriental Bank of Commerce Versus M/s J.R. Agrotech Private Limited And Mr. Mohit Chawla, Resolution Professional Versus Raman Kumar Aggarwal, Gaurav Aggarwal, Disha Aggarwal, Vijay Pal Singh and Co.

The Tribunal found that transactions made by suspended directors before the initiation of Corporate Insolvency Resolution Process (CIRP) violated the ... CIRP Process - allegation that Resolution Professional noticed that respondent Nos.1 and 2, who are the suspended directors of the corporate debtor have made transactions transferring/paying certain amounts in violation of the moratorium - HELD THAT:- Admittedly, CP was admitted in respect of the corporate debtorcompany on 27.07.2018 and moratorium came into force w.e.f. the said date. The corporate debtor opposed the admission of the CP represented by a counsel appointed by the Board of Directors, consisting of respondent Nos.1 and 2 and contested the admission of the CP from the date of receipt of notice and till the CP was admitted on 27.07.2018. Hence, respondent Nos.1 and 2 cannot claim ignorance or no knowledge of the admission of the CP on 27.07.2018. It is not disputed by any of the respondents that the subject payments were made towards the services rendered or goods supplied before the date of admission of the CP i.e. prior to the date of initiation of CIRP proceedings against the corporate debtor-company - It is also not in dispute that from the date of initiation of CIRP and appointment of Interim Resolution Professional, the powers of the Board of Directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the Interim Resolution Professional. Since, admittedly, the subject transactions were made in respect of the services rendered or goods supplied prior to the initiation of CIRP, the same cannot be allowed to be sustained and the persons responsible for the said violation are liable to be proceeded with under Section 74 of the Code. However, taking a lenient view, we grant time to refund the money involved in the said transactions. Application is allowed with the following directions: - i.) Respondent Nos.1 to 4 are hereby directed to refund the money to the account of the corporate debtor, which has been received by them, within 30 days from the date of lifting of lockdown in the State of Punjab, imposed due to pandemic COVID-19 ii.) If Respondent Nos.1 to 4 failed to refund the money to the account of the corporate debtor within the above referred period, they are liable to refund the same with 12% interest p.a. from the date of the respective transactions till the date of actual refund and that the Resolution Professional shall take appropriate steps in terms of Section 74 of the Code. Issues:Violation of moratorium during Corporate Insolvency Resolution Process (CIRP) by suspended directors through transactions made prior to admission of CP.Detailed Analysis:1. Filing of Application by Resolution Professional: The Resolution Professional filed an application seeking directions under Section 14(1)(b) read with Section 74 of the Insolvency and Bankruptcy Code, 2016, regarding transactions made by suspended directors of the corporate debtor prior to the initiation of CIRP.2. Contentions of Respondents: Respondent directors claimed ignorance of CP admission during transaction dates and argued that payments were lawful. Respondent suppliers asserted entitlement to payments for pre-CIRP services and goods supplied.3. Legal Provisions and Precedents: Sections 14 and 17 of the Code were referenced, emphasizing the suspension of powers of directors and the need for compliance during CIRP. Precedents like Tata Motors Finance Limited v. Jadoun International Pvt. Ltd. were cited to support the importance of upholding moratorium provisions.4. Judicial Analysis: The Tribunal noted that the transactions were made before CIRP initiation, rendering them in violation of the moratorium. Citing Ranjit Kapoor v. Hemant Sharma, the Tribunal upheld the necessity to adhere to Section 14 provisions.5. Decision and Directions: While acknowledging the violation, the Tribunal granted time for refunding the amounts involved in the transactions. Respondent directors and suppliers were directed to refund the money within a specified period, failing which they would be liable for interest under Section 74 of the Code.6. Final Directions: The Tribunal allowed the application and directed the respondents to refund the amounts received within a set timeframe. Failure to comply would result in interest liability, and the Resolution Professional was tasked with enforcing the directions under Section 74 of the Code.This detailed analysis highlights the Tribunal's thorough examination of the violation of the moratorium during CIRP, citing legal provisions, precedents, and issuing specific directions for compliance by the respondents.