2022 (3) TMI 14 - AT - Insolvency and Bankruptcy

Tribunal affirms Non-Bailable Warrants under IBC, emphasizes compliance and cooperation

The Tribunal upheld the Adjudicating Authority's jurisdiction to issue Non-Bailable Warrants under the Insolvency and Bankruptcy Code (IBC). It affirmed ... Rejection of application filed by the Appellant for cancellation of the Non-Bailable Warrants of Arrest - Section 61 of the Insolvency and Bankruptcy Code, 2016 - whether the Adjudicating Authority while exercising jurisdiction under the Code have any jurisdiction to issue Non-Bailable Warrant against any person or party? - HELD THAT:- Order XVI Rule 10 specifically empowers the Court to issue in its discretion at any time warrant either with or without bail for arrest of such person who without any lawful excuse, failed to attend or to produce the document in compliance with such summons - the present is a case where the order was issued to Suspended Directors to produce the documents. When the Suspended Directors failed to produce documents required and appear before the Court, Non-Bailable Warrants were issued on 16.07.2021. It is clear that in spite of several opportunities given to Suspended Directors, they refused to surrender even though their prayer for cancellation of the Non-Bailable Warrants was rejected. The provision of Rule 77 of the NCLAT Rules, 2016 read with Order XVI Rule 10 of Civil Procedure Code fully empowers the Adjudicating Authority to issue a Non-Bailable Warrant for enforcing attendance of a person. The power exercised by the Adjudicating Authority in issuing a Non-Bailable Warrant to the Appellants is thus well within jurisdiction of the Adjudicating Authority and the submission of the Counsel for the Appellants that Adjudicating Authority is not clothe with any power to issue Non-Bailable Warrant has to be rejected - The proceedings under the IBC are proceedings of special nature object of which is resolution of insolvency of Corporate Debtor. The Resolution Professional for discharging various statutory duties as entrusted under the Code should have access to necessary documents and records without which the proceedings under the IBC cannot proceed as per the objective of the Code. The Code empowers the Adjudicating Authority to take appropriate measures for ensuring compliance of the provisions of the Code and for ensuring that all personnel extend co-operation to IRP/ RP. The Submission of the Learned Counsel for the Appellants is that Tribunal is not bound by procedures laid down under the CPC, we have already noticed that Rule 77 of the NCLT Rules, 2016 applies various provisions of Civil Procedures Code. The present case are only concerned with the procedure where a person fails to comply with summons which we have already dealt above. The procedure adopted by the Tribunal is in conformity with the NCLT Rules, 2016 as well as order XVI Rule 10 of the Code of Civil Procedure, 1908 - the provision of Order XVI Rule 10 of the Code of Civil Procedure which empowers the Tribunal to issue warrant either with or without bail for arrest of such person. The condition that such person has without lawful excuse, failed to attend or to produce the document in compliance with such summons were fully met and it cannot be said that conditions for issuance of Non-Bailable Warrant were not satisfied. There are no error in the impugned judgment of the Adjudicating Authority rejecting the Application for recall of cancellation of Non-Bailable Warrants - appeal dismissed. Issues Involved:1. Jurisdiction of the Adjudicating Authority to issue Non-Bailable Warrants.2. Compliance with Section 19 of the Insolvency and Bankruptcy Code (IBC), 2016.3. Principles of natural justice in tribunal proceedings.4. Applicability of Civil Procedure Code (CPC) provisions to tribunal proceedings.5. Appropriateness of Non-Bailable Warrants in IBC proceedings.Detailed Analysis:1. Jurisdiction of the Adjudicating Authority to issue Non-Bailable Warrants:The primary issue was whether the Adjudicating Authority under the Insolvency and Bankruptcy Code (IBC) has the jurisdiction to issue Non-Bailable Warrants. The Tribunal examined Rule 77 of the National Company Law Appellate Tribunal (NCLAT) Rules, 2016, which incorporates provisions of Order XVI and XXVI of the Code of Civil Procedure (CPC), 1908. Specifically, Order XVI Rule 10 of the CPC empowers the court to issue warrants, either with or without bail, for the arrest of a person who fails to comply with summons. The Tribunal concluded that the Adjudicating Authority is well within its jurisdiction to issue Non-Bailable Warrants to enforce attendance and compliance with its orders.2. Compliance with Section 19 of the Insolvency and Bankruptcy Code (IBC), 2016:Section 19 of the IBC mandates that the personnel of the corporate debtor, including its suspended directors, must extend cooperation to the Interim Resolution Professional (IRP). The Tribunal noted that despite several opportunities, the suspended directors failed to comply with the directions to produce necessary documents and appear before the court. The Adjudicating Authority, exercising its powers under Section 19, issued Non-Bailable Warrants to ensure compliance. The Tribunal affirmed that the powers under Section 19 are intended to facilitate the resolution process and ensure cooperation from the corporate debtor's personnel.3. Principles of natural justice in tribunal proceedings:The appellants argued that the principles of natural justice were violated as the impugned order was passed without a right of hearing. The Tribunal refuted this claim, stating that the appellants were given multiple opportunities to appear and comply with the orders. Notices and Bailable Warrants were issued before resorting to Non-Bailable Warrants. The Tribunal emphasized that the principles of natural justice were adhered to, and the appellants' non-compliance justified the issuance of Non-Bailable Warrants.4. Applicability of Civil Procedure Code (CPC) provisions to tribunal proceedings:The appellants contended that the Tribunal is not bound by the procedures laid down under the CPC. However, the Tribunal clarified that Rule 77 of the NCLAT Rules, 2016, specifically applies certain provisions of the CPC, including Order XVI Rule 10, to tribunal proceedings. The Tribunal concluded that its procedure was in conformity with both the NCLAT Rules and the CPC, thereby validating the issuance of Non-Bailable Warrants.5. Appropriateness of Non-Bailable Warrants in IBC proceedings:The appellants argued that the issuance of Non-Bailable Warrants was unnecessary and that the Adjudicating Authority could have proceeded ex parte. The Tribunal rejected this argument, stating that the presence and cooperation of the suspended directors were crucial for the resolution process. The IBC proceedings are of a special nature, and the Resolution Professional requires access to documents and information to fulfill statutory duties. The Tribunal held that the issuance of Non-Bailable Warrants was appropriate and necessary to enforce compliance and facilitate the insolvency resolution process.Conclusion:The Tribunal dismissed the appeal, affirming the Adjudicating Authority's jurisdiction and actions. It upheld the issuance of Non-Bailable Warrants as a valid and necessary measure to ensure compliance with the IBC and cooperation from the suspended directors. The Tribunal emphasized the importance of adherence to statutory duties and the principles of natural justice in the resolution process.