2022 (8) TMI 1001 - AT - Insolvency and Bankruptcy

Tribunal Upholds Denial of Document Disclosure Request in Insolvency Case

The Appellate Tribunal upheld the Adjudicating Authority's decision to reject the appellant's request for disclosure of documents by the Corporate Debtor. ... Power of the Bench to call for further information or evidence - directions upon Corporate Debtor to disclose the following documents - privity of contract - HELD THAT:- Rule 43 of the NCLT Rules, 2016 deals with powers of the Bench to call further information or evidence. There cannot be any quarrel regarding Bench having such powers. Rule 43 (1) and (2) gives ample powers to the Bench to call any information or evidence as it may consider necessary in its discretion. In the present case, the Appellant has filed an application seeking directions to the Corporate Debtor to disclose certain documents. The Adjudicating Authority after considering the application has given reasons especially that there is no privity of contract between the Appellant and the Corporate Debtor, hence, he is not entitled to call for documents. The Adjudicating Authority has exercised its discretion in accordance with law after giving due reasons which does not warrant any interference in exercise of our Appellate jurisdiction - Application disposed off. Issues:- Appeal against rejection of directions for disclosure of documents by Corporate Debtor.Detailed Analysis:1. The appeal was filed against the order of the Adjudicating Authority rejecting the Appellant's request for directions to the Corporate Debtor to disclose specific documents related to their financial transactions from 2015-2016 till 2020-2021. The Adjudicating Authority found that the Operational Creditor had a good case to be tried in a Civil Court, not within its jurisdiction, due to issues raised by the Corporate Debtor regarding privity of contract. The Adjudicating Authority emphasized its limited role in looking at outstanding debts and defaults for admission of a petition or initiation of Corporate Insolvency Resolution Process (CIRP).2. The Adjudicating Authority cited Rule 43 of the NCLT Rules, 2016, which empowers the Bench to call for further information or evidence. The rule allows the Bench to require parties to produce necessary documentary or other evidence to ascertain the truth of allegations or for passing orders. The Appellant relied on this rule to support their request for disclosure of documents by the Corporate Debtor.3. Rule 43 of the NCLT Rules, 2016 grants broad powers to the Bench to call for additional information or evidence as deemed necessary. In this case, the Adjudicating Authority concluded that there was no privity of contract between the Appellant and the Corporate Debtor, leading to the rejection of the request for document disclosure.4. The Appellate Tribunal upheld the decision of the Adjudicating Authority, stating that it did not find any error in the rejection of the Appellant's request. The Tribunal noted that the Adjudicating Authority had properly exercised its discretion in accordance with the law and provided valid reasons for its decision. The Tribunal clarified that the rejection of the request should not be considered a final opinion during the disposal of any Section 9 application in the future.In conclusion, the Appellate Tribunal dismissed the appeal against the rejection of directions for document disclosure by the Corporate Debtor, affirming the Adjudicating Authority's decision based on the lack of privity of contract between the parties and the limited jurisdiction of the Authority in such matters. The Tribunal emphasized the importance of proper exercise of discretion and adherence to legal provisions while considering requests for document disclosure in insolvency proceedings.