2021 (3) TMI 628 - Tri - Insolvency and Bankruptcy

Bank held negligent for unauthorized withdrawals, ordered to reimburse Rs. 44.90 Lakh. Legal action permitted against individuals. Surrender assets.

The Tribunal found Respondent No.4 Bank negligent for allowing unauthorized withdrawals from the corporate debtor's account and ordered it to reimburse ... Seeking directions from this tribunal in discharging his duties (Resolution Professional) in Corporate Insolvency Resolution Process (CIRP) of Independent TV Limited. - Section 19(2) & (3) and Section 60(5) of IBC - HELD THAT:- This Bench is of the considered view that there is a clear case of negligence and lapse on the part of Respondent No.4 Bank in observing normal banking prudence in this case and the Bench hereby orders that Respondent No.4 Bank will immediately make good of ₹ 44,90,000/- withdrawn from the Bank Account of the Corporate Debtor by the persons who were not authorized to sign on behalf of the Company on the date allowing the transactions from the Bank Account of the Corporate Debtor. The plea of the Respondent No.4 Bank that a meager amount of ₹ 561.11/- was standing to the credit of the Corporate Debtor as on the date of initiation of Corporate Insolvency Resolution Process is not tenable as during course of Corporate Insolvency Resolution Process, there are going to be deposits and payments from the Bank Account of the Corporate Debtor in the normal course of the business, wherein the monies will be credited to bank account of the Corporate Debtor in normal course of business, and debit entries can be effected by the Bank on the instructions received from the Authorized signatory of the bank account only. The order of this Court is to be complied within 15 days by the Respondent No.4 Bank. However, since a fraud has been committed against the Respondent No.4 Bank, the Respondent No.4 Bank is free to initiate Criminal/Civil actions against the other Respondents and/or against any other persons involved in committing fraud against the Respondent No.4 Bank. The compliance be reported by the Respondent No.4 Bank by way of an affidavit to this bench. Issues Involved:1. Issuance of employment letters to suspended management members.2. Alleged non-cooperation and obstruction by the suspended management.3. Unauthorized withdrawal of funds from the corporate debtor's bank account.4. Non-submission of books of accounts and fixed assets.5. Alleged negligence by the bank in observing normal banking prudence.Issue-wise Detailed Analysis:1. Issuance of Employment Letters to Suspended Management:The Resolution Professional (RP) issued employment letters to two individuals from the suspended management as instructed by the Committee of Creditors (CoC) during the first CoC meeting on 03.07.2020. This action was taken due to their initial cooperation in the Corporate Insolvency Resolution Process (CIRP) proceedings.2. Alleged Non-Cooperation and Obstruction by the Suspended Management:The RP alleged that the suspended management failed to provide the necessary books of accounts and other information despite multiple requests and reminders. Furthermore, the RP claimed that the suspended management did not hand over fixed assets located in Mumbai and Bangalore and failed to provide three out of eight hypothecated Bolero vehicles. The RP also terminated the employment of the suspended board members due to their conduct and instructed them to cooperate in the CIRP proceedings.3. Unauthorized Withdrawal of Funds from the Corporate Debtor's Bank Account:The RP discovered unauthorized withdrawals of Rs. 44.90 Lakh from the corporate debtor's bank account maintained with Respondent No.4. Despite the RP's instructions to freeze the account, the bank allowed these transactions. Respondent No.1 claimed he acted on instructions from Respondent No.3, believing the transactions were operational expenses. Respondent No.2 and Respondent No.3 denied involvement in the transactions, emphasizing their lack of financial decision-making authority and knowledge of the withdrawals.4. Non-Submission of Books of Accounts and Fixed Assets:The RP repeatedly requested the suspended management to furnish the books of accounts and fixed assets register but received only partial digital copies. The suspended management cited COVID-19 restrictions and lockdowns as reasons for delays in handing over physical assets. They also claimed that some vehicles were in the custody of the UP Police or with a former director, Mr. Sanjay Bhatti.5. Alleged Negligence by the Bank in Observing Normal Banking Prudence:The RP communicated the initiation of CIRP to Respondent No.4 Bank via email on 20.03.2020. The bank claimed the email was sent to an address managed by an officer who was not attending duty due to the lockdown. The Tribunal found the bank negligent for allowing unauthorized transactions and ordered it to make good the withdrawn amount of Rs. 44.90 Lakh. The bank was also directed to initiate criminal or civil actions against the responsible parties.Order:1. The Tribunal found negligence on the part of Respondent No.4 Bank and ordered it to reimburse Rs. 44.90 Lakh to the corporate debtor's account within 15 days.2. The bank was allowed to pursue legal actions against the individuals involved in the unauthorized transactions.3. The RP was authorized to initiate legal actions against Respondents No.1, 2, and 3 for unauthorized payments.4. Respondents No.1, 2, and 3 were directed to hand over all assets, including Bolero vehicles, to the RP and cooperate fully in the CIRP proceedings.5. The registry was instructed to communicate the order to the RP, Respondents, and the RBI immediately.The application IA 1299/MB-IV/2020 in CP(IB) 3176/MB-IV/2019 was disposed of accordingly.