2026 (1) TMI 1090 - AT - IBC

Permission to travel abroad during insolvency proceedings: Rs40 crore security struck down, two Rs50 crore surety bonds upheld

Permission to travel abroad during insolvency proceedings was contested where the Adjudicating Authority imposed multiple conditions. The tribunal held ... Permission to travel abroad during insolvency proceedings - safeguarding creditors' interests and prevention of asset dissipation - personal bankruptcy and administration of bankrupt's estate - cooperation with the Bankruptcy Trustee - security deposit and surety obligations as pre-conditions to leave the country - Adjudicating Authority (National Company Law Tribunal) - National Company Law Appellate Tribunal - whether the conditionalities imposed by the Adjudicating Authority at para 33 which has been assailed by the Appellant warrants any interference. - HELD THAT:- The condition placed at para 33(a) directing the Appellant to make arrangements for deposit of Rs 40 Cr. as security, we are of the view that this stringent conditionality imposed by the Adjudicating Authority cannot be sustained since the Appellant has already been declared bankrupt and a Bankruptcy Trustee has already been appointed to administer the asset and estate of the bankrupt Appellant. When the Appellant has already become a bankrupt, it follows therefrom that the Appellant cannot be expected to have any source available with him which he could tap for the purpose of provisioning this Security Deposit amount. We also do not find any material placed on record either by Respondent No.1 or Respondent No.2 to show that the Appellant was in possession of a sum of the magnitude of Rs 40 Cr or in a position to muster such a sizeable resource. Hence, we are inclined to agree with the Appellant that imposition of such an impossible condition which by its very nature cannot be practically fulfilled tantamount to blocking any possibility of the Appellant to travel abroad. We are therefore of the view that this condition deserves to be relaxed. As regards the condition placed at para 33(b) which mandates execution of bonds of two solvent sureties of Rs 50 Cr. each, we are of the view that this conditionality is reasonable and justified as the Adjudicating Authority is rightly persuaded that in the conspectus of given facts and circumstances, there is a pressing need to adequately safeguard the interests of the financial creditors also. We therefore do not feel it necessary to dilute this conditionality laid down in the impugned order at para 33(b). The other conditions at para 33(c) to (l) not having been disputed by the Appellant, we not feel the need of interfering with them. We allow the Appeal and accordingly modify the directions contained in para 33 of the impugned order Issues: Whether the conditionalities imposed by the Adjudicating Authority in para 33 of the impugned order permitting the bankrupt Appellant to travel abroadspecifically (a) deposit of Rs. 40 Crore as security and (b) execution of bonds by two solvent sureties of Rs. 50 Crore each (along with other conditions (c) to (l))are sustainable and require interference.Analysis: The Tribunal examined the impugned order and the factual matrix including the Appellant's declared bankrupt status, appointment of a Bankruptcy Trustee, pending proceedings/LOCs, and the need to safeguard financial creditors from risk of asset dissipation. The Adjudicating Authority's reasons for granting travel were accepted as sound. However, the Tribunal analysed whether requiring the bankrupt Appellant to arrange a Rs. 40 Crore security deposit was practicable or justified given that a bankrupt person ordinarily lacks available assets to raise such a sum and no convincing material was placed on record showing the Appellant's capacity to provide that amount. The Tribunal further considered the necessity and proportionality of other conditions: it found the requirement of execution of bonds by two solvent sureties of Rs. 50 Crore each to be a reasonable protective measure for creditors given the circumstances, and noted that conditions (c) to (l) were not challenged and serve to protect creditor interests and ensure cooperation with the bankruptcy process.Conclusion: The direction in para 33(a) requiring deposit of Rs. 40 Crore is set aside; the remaining conditionalities in para 33(b) to (l) are upheld and shall remain in force. The permission to travel remains subject to other permissions from competent authorities as required by law.