Appeal allows refund cancellation, fines set aside, Record Management Services continue; parties bear own costs.

The appeal was partly allowed, setting aside the directions for the refund of payments and the imposition of a fine. However, the direction to continue providing Record Management Services was affirmed. Each party was directed to bear their own costs.

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Issues Involved:
1. Imposition of fine under Section 235A by the Adjudicating Authority.
2. Classification of Record Management Services as critical services under Section 14(2A).
3. Direction to refund the amount received from the Resolution Professional after initiation of CIRP.

Issue-wise Detailed Analysis:

1. Imposition of Fine under Section 235A by the Adjudicating Authority:

The core issue was whether the Adjudicating Authority could impose a fine of Rs. 20 lakh under Section 235A of the Insolvency and Bankruptcy Code (IBC). The judgment examined the statutory scheme of the IBC regarding penalties and punishments. Section 235A, inserted by Act 8 of 2018, provides for punishment for contravention of the Code where no specific penalty is provided. The judgment emphasized that the term "punishable with fine" indicates a punishment for an offence, which should be tried as per Section 236 by a Special Court upon a complaint by the Board or Central Government. The judgment concluded that the Adjudicating Authority exceeded its jurisdiction by imposing the fine, as it lacked the authority to punish offences under Section 235A. Therefore, the direction to impose a fine of Rs. 20 lakh was set aside.

2. Classification of Record Management Services as Critical Services under Section 14(2A):

The second issue addressed whether Record Management Services are critical services under Section 14(2A) of the IBC, which should not be terminated during the moratorium period. Section 14(2A) ensures the continuation of critical services necessary to protect and preserve the value of the corporate debtor. The judgment affirmed that Record Management Services could be classified as critical services, as they are essential for maintaining the operations of the Corporate Debtor. The Appellant had continued providing these services during the CIRP, justifying the direction by the Adjudicating Authority to continue providing these services. Thus, the direction in paragraph 15(A) for the Appellant to continue providing services was upheld.

3. Direction to Refund the Amount Received from the Resolution Professional after Initiation of CIRP:

The third issue was whether the Adjudicating Authority rightly directed the Appellant to refund the amount received from the Resolution Professional for services provided during the CIRP. The Appellant argued that they continued to provide services and issued invoices for the same during the CIRP, with part payments made. The judgment observed that the Resolution Professional's application seeking a declaration that the Appellant was not entitled to any payment for services during the CIRP period could not be justified. Consequently, the direction to refund the payments already made was deemed unsustainable. Therefore, the direction in paragraph 15(B) for the refund of the amount was set aside.

Conclusion:

The appeal was partly allowed, setting aside the directions in paragraphs 15(B) and 15(C) regarding the refund of payments and the imposition of a fine. However, the direction in paragraph 15(A) to continue providing Record Management Services was affirmed. The parties were directed to bear their own costs.

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