2021 (9) TMI 744 - Tri - Insolvency and Bankruptcy

Tribunal Denies RP's Time Exclusion Request, Emphasizes Duty and Urges Asset Control

Onemax Yarn Merchants Private Limited Versus Nandlal Kamal Kishore Vyapaar Private Limited

The Tribunal rejected the Resolution Professional's application seeking exclusion of time under Section 60(5) for opinion formation, emphasizing RP's ... Seeking exclusion of period starting on the date of commencement of CIRP till the availability of books of accounts and details from the personnel of the Corporate Debtor - HELD THAT:- Section 19 provides for the personnel of the Corporate Debtor to cooperate with the interim resolution professional and if they do not cooperate, an application may be preferred under sub-section (2) thereof. Although the application under section 19(2) has been filed in the present case, it has not been pressed for hearing so far. Filing an application does not absolve the RP of his duties but he also has to pursue the application diligently, which has not been done in the present case. Although a provision for filing of application against the non-cooperating members has been provided for in the Code, the same shall not be resorted to unless the professional has discharged his duties proactively and diligently. The duty cast upon the IRP and the RP under sections 18 and 25 of the Code are not empty formalities that the professionals have to discharge just for the sake of doing it. Section 25(2) provides, inter alia, for the RP to take custody and control of all the assets of the Corporate Debtor, including the business records of the Corporate Debtor. In the present case, all that the RP has done is contact the member of the suspended board through email and speed post. The utter lack of seriousness on the part of the RP in discharging his duties under the Code is appalling. Coming back to the point of exclusion, although a discretion has been provided to the Adjudicating Authority to enlarge the time for completion of CIRP, the discretion is to be used sparingly and judiciously in cases where the Applicant demonstrates that the Corporate Debtor is only a few days short of achieving a resolution by way of a resolution plan and that it would be in the interest of all stakeholders that the Corporate Debtor be put back on its feet instead of being sent into liquidation. Application dismissed. Issues:Exclusion of time period under section 60(5) for formation of opinion and determination by Resolution Professional (RP) regarding transactions, Non-cooperation of Corporate Debtor personnel with RP, Duty of RP to take custody and control of assets and documents of Corporate Debtor, Discretion of Adjudicating Authority to enlarge time for completion of Corporate Insolvency Resolution Process (CIRP).Exclusion of Time Period under Section 60(5):The RP filed an application seeking exclusion of the period from the commencement of CIRP until the availability of books of accounts and details from the Corporate Debtor to form an opinion under regulation 35A of the CIRP Regulations. The CoC suggested the RP to form an opinion before appointing a transaction auditor, but the Tribunal emphasized that it is the RP's duty to independently form an opinion and not rely on CoC's suggestions. The Tribunal held that seeking exclusion of time to form an opinion is not the appropriate course. The RP's failure to diligently pursue an application under section 19(2) for non-cooperation of Corporate Debtor personnel was also highlighted.Non-cooperation of Corporate Debtor Personnel:The RP alleged non-cooperation from the Corporate Debtor personnel in providing assets, books of accounts, and other details, hindering the RP's ability to form an opinion. The Tribunal emphasized that the RP must actively pursue remedies under section 19 against non-cooperating members and take custody and control of all assets and documents of the Corporate Debtor. The Tribunal criticized the RP's lack of seriousness in discharging duties under the Code.Duty of RP to Take Custody and Control:The Tribunal stressed that it is the RP's responsibility to take custody and control of assets and documents of the Corporate Debtor, not solely reliant on the cooperation of the suspended board members. The RP's failure to demonstrate diligent discharge of duties was highlighted, emphasizing the RP's obligation to actively fulfill responsibilities under the Code.Discretion of Adjudicating Authority to Enlarge Time:While acknowledging the discretion of the Adjudicating Authority to enlarge the time for CIRP completion, the Tribunal noted that such discretion should be used judiciously in cases close to resolution. The Tribunal found the RP's grounds for seeking exclusion of time as lacking merit and bordering on ludicrousness, especially as the Corporate Debtor was far from resolution. The Tribunal rejected the RP's application, deeming it incomplete and farcical, and directed the Registry to inform the IBBI for necessary examination and directions.This detailed analysis covers the issues involved in the judgment, highlighting the Tribunal's findings and reasoning regarding each aspect of the case.