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 that the directive requiring a Rs 40 crore security deposit was unsustainable because the appellant had been declared bankrupt and a bankruptcy trustee administers the estate, making such performance impossible; that condition was relaxed. The tribunal sustained the requirement for execution of bonds by two solvent sureties of Rs 50 crore each as a reasonable protective measure for financial creditors, and left undisputed conditions unaltered. The appeal was allowed with modification of the impugned conditions.

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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.

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