2021 (9) TMI 682 - Tri - Insolvency and Bankruptcy

Tribunal directs cooperation from suspended Directors under Insolvency Code

The Tribunal allowed the applications under Section 19 of the Insolvency and Bankruptcy Code, directing the suspended Directors and managerial persons to ... Seeking issuance of necessary directions to the Suspended Directors and Statutory Auditors of the Corporate Debtor to provide assistance, co-operation and information required by the Resolution Professional in discharging his statutory duties - Section 19(2) & Section 60(5) read with rule 11 of the NCLT Rules, 2016 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In view of the facts of the case on hand and after considering the provisions contained thereof, this adjudicating Authority is of the view that the ex-management are collectively as well as independently, must furnish information and assist the RP in managing the affairs of the Corporate Debtor in order to enable the RP to complete the CIRP expeditiously and therefore, the persons who can cooperate with the RP and persuade the other managerial personnel to supply the documents, cannot escape their obligation. This Adjudicating Authority in order to implement the intention of the Code directs the suspended Directors and managerial persons to extend full cooperation and simultaneously furnish all the information of their accounts as well as all the information as required by the Resolution Professional to complete the CIRP efficiently and in time bound manner and RP is further directed to take possession of the whole record. Further, when information are in knowledge and possession of the Directors, they shall be held responsible for non-submission - Of the information as well as for non-cooperation with the RP as prescribed under Section 19 of the Code, and shall therefore be liable for punishment under Section 70 of the Code, if information is not provided further. Application allowed. Issues:Application under Section 19(2) & Section 60(5) read with rule 11 of the NCLT Rules, 2016 for directions to Suspended Directors and Statutory Auditors to provide assistance, co-operation, and information to Resolution Professional.Detailed Analysis:1. The Tribunal initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor and appointed an Interim Resolution Professional, later confirmed as Resolution Professional.2. The Resolution Professional requested documents from Suspended Directors and Statutory Auditors multiple times but received no response, hindering the valuation process.3. Despite efforts by the Resolution Professional, including convening meetings and requesting information, non-cooperation from the Suspended Directors and Statutory Auditors delayed the CIR Process.4. The Resolution Professional was provided with some documents by the ex-management, but they did not meet the requirements for an effective CIR Process.5. Notices were issued to the respondents, but they did not appear or respond, leading to an ex parte hearing and subsequent reserved order.6. The Tribunal referred to Section 19 of the Insolvency and Bankruptcy Code, emphasizing the obligation of Corporate Debtor personnel to assist the Resolution Professional.7. Considering the facts of the case, the Tribunal directed the suspended Directors and managerial persons to cooperate fully and provide all necessary information to complete the CIRP efficiently.8. The Tribunal held that failure to provide information or cooperate could lead to liability under Section 70 of the Code.9. The applications were allowed, and the Tribunal directed the suspended Directors and managerial persons to extend full cooperation to the Resolution Professional.10. The Resolution Professional was further directed to take possession of all relevant records to facilitate the CIRP process effectively and efficiently.11. The Tribunal emphasized the importance of timely cooperation and information provision to ensure the completion of the CIRP within the required time frame.12. The judgment concluded by allowing the applications and disposing of the matter, highlighting the importance of compliance with the directions given by the Tribunal for the successful resolution of the Corporate Insolvency process.