Suspended directors must cooperate with Resolution Professional; Tribunal clarifies prosecution procedure under IBC Section 70

The Adjudicating Authority determined that suspended directors were obligated to provide documents and cooperate with the Resolution Professional, directing the initiation of a criminal case under Section 70 of the IBC. The Appellant argued all documents were submitted, shifting responsibility to Respondent No.2. The Authority's exercise of power under Section 19(2) was upheld, clarifying that prosecution under Section 70 must be initiated by specific entities, not the Resolution Professional. The Tribunal clarified the procedural requirements for prosecution under Section 70 and disposed of the appeal accordingly.

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Issues:
1. Failure to provide documents by suspended directors.
2. Responsibility of directors to furnish information.
3. Direction for initiating prosecution under Section 70 of the IBC.
4. Power of Adjudicating Authority under Section 19(2) of the IBC.
5. Clarification on the initiation of prosecution under Section 70.

Analysis:
1. The appeal was filed against an order passed by the Adjudicating Authority regarding the failure of suspended directors to provide documents and cooperate with the Resolution Professional. The Authority concluded that both directors were liable to hand over the documents and furnish required information, directing the Resolution Professional to initiate a criminal case against them under Section 70 of the IBC.

2. The Appellant contended that all documents were provided, and it was the responsibility of Respondent No.2 to provide further documents if needed. The Resolution Professional had filed a police complaint, but no FIR had been registered yet. The Respondent argued that there was total non-cooperation by the Appellant and Respondent No.2, leading to the filing of an application under Section 19(2) which resulted in the impugned order.

3. The Adjudicating Authority exercised its power under Section 19(2) of the IBC, which allows issuing directions to personnel of the Corporate Debtor to cooperate. Section 19(3) mandates compliance with the resolution professional's instructions and cooperation in managing the corporate debtor. If offenses under Section 70 are committed, prosecution can only be initiated as per the procedure outlined in Section 236.

4. Prosecution under Section 70 can only be initiated by the Board, Central Government, or an authorized person, not by the Resolution Professional. The Resolution Professional clarified that no prosecution was initiated under Section 70, and any such action would be taken by the Board. The order had no impact on separate proceedings for other offenses under the Indian Penal Code.

5. The Appellate Tribunal clarified that prosecution under Section 70 must follow the procedure in Section 236(2) and cannot be initiated by the Resolution Professional. Any other offenses, including those under the Indian Penal Code, are separate matters for which a complaint to the police station can be filed independently. The appeal was disposed of based on these clarifications.

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