2020 (11) TMI 244 - Tri - Insolvency and Bankruptcy

Misjoinder of parties leads to cost award, application proceeds against Suspended Management

The Tribunal dismissed the application against Respondent No. 3 and 4 due to misjoinder of parties and misuse of legal process, imposing a cost of Rs. ... Direction for payment of professional fees - extension of the cooperation of the Corporate Debtor and its personnel i.e. promoters, directors etc. to the RP - section 19 of the IB Code - HELD THAT:- It is clear that on the garb of the instant application, which is filed under section 19 of the IB Code, RP is seeking direction for reimbursement of his payment from Respondent No. 3 and 4. The very impleadment of the Respondent No. 3 and 4 in the instant application is not only bad in the eye of law but is blatant misuse of the process of law and thereby, the Respondent No. 3 and 4 are dragged before this Bench for no fault of them. Consequent upon which, they are compelled to file their reply, causing loss not only in the form of pecuniary as well as mental and physical harassment. Such type of act is not expected from the RP. The instant application is dismissed as against the Respondent No. 3 and 4 with a cost of ₹ 30,000/- to be paid to the Respondent No. 3 only, as Respondent No. 4 neither shown his presence nor filed any reply. Issues:1. Application under section 19 of the IB Code for direction upon Respondents.2. Allegation of Suspended Management not providing documents to RP.3. Impleading of Respondent No. 3 and 4 for professional fee payment.4. Maintainability of the application under section 19.5. Misjoinder of parties and misuse of legal process.6. Dismissal of application against Respondent No. 3 and 4.Analysis:The judgment pertains to an application filed under section 19 of the Insolvency and Bankruptcy Code seeking directions against the Respondents. The RP alleged that the Suspended Management failed to provide necessary documents despite multiple demands. The RP also included Respondent No. 3 and 4, seeking direction for remitting outstanding professional fees. However, the Respondent No. 3 argued that the application was not maintainable under section 19 as it primarily deals with cooperation of the Corporate Debtor and its personnel with the RP, not third-party payment issues.The Tribunal noted that the inclusion of Respondent No. 3 and 4 in the application under section 19 was improper and constituted a misjoinder of parties. The RP's attempt to seek reimbursement from these parties was considered a misuse of legal process. The judgment emphasized that section 19 of the IB Code primarily focuses on extending cooperation to the RP by the personnel associated with the Corporate Debtor, not for claims against unrelated parties. The Tribunal highlighted that dragging parties before the Bench without proper cause led to unnecessary costs and harassment for the Respondents.Consequently, the Tribunal dismissed the application against Respondent No. 3 and 4, imposing a cost of Rs. 30,000 to be paid to Respondent No. 3. However, the application was deemed maintainable against the Suspended Management. The RP was directed to issue notice to the Suspended Management for further proceedings scheduled on 16.09.2020. The judgment emphasized the importance of adhering to the legal provisions and avoiding unnecessary inclusion of unrelated parties in insolvency proceedings to prevent misuse of the legal process.