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 Rs. 44.90 Lakh within 15 days. The bank was permitted to take legal action against the individuals involved. The RP was authorized to pursue legal action against Respondents No.1, 2, and 3 for unauthorized payments. Respondents No.1, 2, and 3 were directed to surrender all assets, including vehicles, and cooperate in the insolvency proceedings. The registry was instructed to promptly communicate the order to relevant parties.

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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.

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