TaxTMI 
TaxTMI 
2024 (9) TMI 510
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....r Section 9 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as 'IBC') filed by PR International initiating Corporate Insolvency Resolution Process (CIRP) against GTHS Retails Pvt. Limited (Corporate Debtor). b) The Petitioner was appointed as an Interim Resolution Professional (IRP) and vide Order dated 20.12.2017, the Adjudicating Authority confirmed and appointed the Petitioner as the Resolution Professional. c) Vide Order dated 04.07.2019, the Adjudicating Authority took note of the fact as informed by the Petitioner that the period of 270 days within which CIRP needs to be completed has come to an end and also the Resolution Applicant has withdrawn his offer and therefore the only option left was to proceed towards Liquidation. The Liquidation process against the Corporate Debtor was initiated. d) On 16.10.2019, Mr. Ramit Rastogi was appointed as the Liquidator and the Petitioner herein was discharged from this case. e) The Liquidator filed an application being IA/3719/2020 before the Adjudicating Authority seeking directions to the suspended ex-Directors of the Corporate Debtor to furnish the information and documents as p....
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....ed upon to explain the efforts made for realisation of value of the abovementioned assets and why didn't they file any application for realisation of the assets/debt of the Corporate Debtor. Let notice be issued to the IRP/RP as well as the Liquidator to remain personally present before this Tribunal on the next date of hearing. Simultaneously, RoC is also directed to file a detailed report in the matter. Copy of the Compliance report and the valuation report filed before this Tribunal be sent to the RoC by the Applicant as well as by the Registry. The matter be adjourned for the report of RoC as well as explanation of the IRP/ RP and Liquidator. Ld. Counsel for the Liquidator is directed inform all of them. List on 05.09.2022." i) In compliance with the aforesaid order, the Petitioner filed his reply dated 29.10.2022 to the queries sought for by the Adjudicating Authority. The Adjudicating Authority Vide Order dated 17.01.2023 also sought a report from the IBBI regarding the doubts as raised in the order dated 15.07.2022. j) Thereafter, on 25.04.2023, a notice of investigation under Regulation 8 (1) of the Insolvency & Bankruptcy Board of In....
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.... the same. n) The Petitioner in the aforesaid e-mail dated 04.07.2023, further stated that it was the duty of the Liquidator to retrieve all the documents from the company's premises as was required by him in terms of the Liquidation Process Regulations. o) It is further stated that when the Liquidator was given complete possession of the Corporate Debtor on 12.09.2019, the Corporate Debtor was a going concern and all the records/documents were at the premises only. It is also stated that complete set of all the documents were handed over to the Liquidator by 07.11.2019 and the Liquidator had himself acknowledged the receipt of all the documents vide e-mail dated 20.09.2020. p) The investigation report was filed by the Investigating Authority to the IBBI wherein it was stated that AGM(MM) was directed to conduct investigation in the matter of GTHS Retails Pvt. Limited and accordingly a notice under Section 8 (1) of the Inspection Regulations was issued to the Petitioner as well as the Liquidator. The Investigating Authority after considering the submissions made by the Petitioner observed as under:- "iii) IA's Observation It has ....
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...., IP failed to provide any details regarding the same, wherein said security deposits were adjusted against the unpaid rent. It has been observed that RP failed to take any step to realise the said security deposit advanced to various franchises. A copy of the reply of RP has been annexed hereto as Annexure VIII. RP further failed to realise the WIP amounting to Rs.79.54 lakhs lying with various petty job workers as shown in the books of the CD as on 03.08.2017 i.e., the Insolvency Commencement Date (ICD). Section 25 (2) (b) of the Insolvency and Bankruptcy Code (hereinafter referred to as 'the Code') states that the RP has the duty to represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings. RP was under the duty to approach the AA with regards to any directions relating to the realization of security deposits advanced to various franchise and the WIP lying with various petty workers. However, RP failed to take any steps towards realization of the said security deposits paid to various franchise. Further, Mr. Ramit Rastogi was appo....
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....ssued by the IBBI on 14th August 2019. There was a delay of 414 days from the due date of submission of CIRP Form 1, a delay of 11 days from the due date of submission of CIRP Form 3 and a delay of 11 days from the due date of submission of CIRP Form 5. Supporting documents for the same are collectively annexed hereto as Annexure XII. Form Due Date Date of Submission Delay (in days) CIRP Form 1 30/09/2019* 17/11/2020 414 CIRP Form 3 30/09/2019* 17/10/2019 11 CIRP Form 5 30/09/2019* 11/10/2019 11 * In the IBBI circular dated 14th August 2019, it is mentioned that all Forms which became due on or before 15th September had to be submitted by 30th September 2019. The relevant extract is as follows "It is directed that an IP shall file electronically- a. the Forms along with relevant information and records, which have become due on or before 15th September, 2019 in respect of all CIRPs, both closed and ongoing, conducted by him, by 30th September, 2019: and b. the Forms along with relevant information and records, which will become due on or after 16th September, 2019 in respect of CIRPs conducted by hi....
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....ions as stated in the investigation report has contravened Section 25 (1), 25 (2) (a), 25 (2) (b), 208 (2) (a), 208 (2) (e) of the IBC, Regulation 40B of the CIRP Regulations, Regulations 7 (2) (a) & (h) of the IP Regulations read with Clauses 1, 2, 14, and 19 of the Code of Conduct specified thereunder read with Circular No. IBBI/CIRP/023/2019 dated 14th August, 2019. Petitioner was also directed to show cause as to why actions as permissible under Section 220 (2) of the IBC including cancellation of his registration shall not be taken against him. He was directed to submit his reply along with supporting material latest by 08.09.2023. s) The Petitioner vide letter dated 13.09.2023 replied to the Show Cause Notice stating that Petitioner has always worked in compliance of the provisions of the IBC and has taken precautions to preserve and protect the assets and continue the business operations of the corporate debtor. The Petitioner also stated that he had represented and acted on behalf of the corporate debtor in exercising rights of the corporate debtor in judicial, quasi judicial and arbitration proceedings and hence was in compliance of Section 25 (2) (b) of IBC. Peti....
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....y be, will decide about continuation of existing assignment of Mr. Sandeep Bhatt. 4.6. A copy of this order shall also be forwarded to the Registrar of the Principal Bench of the National Company Law Tribunal, New Delhi, for information. 4.7. Accordingly, the show cause notice is disposed of." u) It is this Order which has been challenged by the Petitioner in the present Petition. 3. Learned Counsel for the Petitioner states that the impugned Order dated 01.11.2023, passed by the Respondents, is illegal, devoid of merits, and passed without considering the facts and evidence placed by the Petitioner. It is also stated that the principle of natural justice on which our judicial system is based upon was not at all followed as the Petitioner was not informed about any incriminating documents relied upon by the Disciplinary Committee while passing the impugned Order. It is further stated that the Disciplinary Committee which heard the case of the Petitioner and even requested the Petitioner to file certain documents was not the Disciplinary Committee that passed the impugned Order. 4. It is further contended by the learned Counsel for the Petitioner that the ....
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....equire any interference from this Court in Writ Jurisdiction. 6. Heard the Counsels for the parties and perused the material on record. 7. The contention of the Petitioner that the Oder of the IBBI suffers from corum non-judice inasmuch as it was only a single member committee which passed the impugned Order, is not tenable in law. At this juncture, it is imperative to reproduce Section 220 of the IBC and the same reads as under: "220. (1) The Board shall constitute a disciplinary committee to consider the reports of the investigating Authority submitted under sub-section (6) of section 218: Provided that the members of the disciplinary committee shall consist of whole-time members of the Board only. (2) On the examination of the report of the Investigating Authority, if the disciplinary committee is satisfied that sufficient cause exists, it may impose penalty1 as specified in sub-section (3) or suspend or cancel the registration of the insolvency professional or, suspend or cancel the registration of insolvency professional agency or information utility as the case may be. (3) Where any insolvency professional agency or insolvency profess....
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....he Petitioner is not tenable in law. 10. The contention of the learned Counsel for the Petitioner that the IBBI ought to have awaited the proceedings before the Adjudicating Authority instead of rushing with enquiry awarding punishment, cannot be accepted. Both the proceedings are entirely distinct from each other. IBBI has been constituted to oversee the conduct of the IRPs and the Liquidators and to see as to whether the IRPs and Liquidators are acting in compliance with the mandate of the IBC. The IBBI can proceed ahead to investigate into the conduct of the IRPs and the Liquidators even if on getting information that the IRP has committed a misconduct. 11. It is the responsibility of the Resolution Professional to manage the affairs of the corporate debtor as a going concern during corporate insolvency resolution process and to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans, and to collect, collate and finally admit claims of all creditors, which must be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated by the Committee of Creditors. The role of the Resol....
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.... the powers of Appellate Tribunal. It does not review or reweigh the evidence upon which the determination of the inferior tribunal purports to be based. It demolishes the order which it considers to be without jurisdiction or palpably erroneous but does not substitute its own views for those of the inferior tribunal. The writ of certiorari can be issued if an error of law is apparent on the face of the record. A writ of certiorari, being a high prerogative writ, should not be issued on mere asking. 52. The second cardinal principle of exercise of extraordinary jurisdiction under Article 226 of the Constitution is that in a given case, even if some action or order challenged in the writ petition is found to be illegal and invalid, the High Court while exercising its extraordinary jurisdiction thereunder can refuse to upset it with a view to doing substantial justice between the parties. Article 226 of the Constitution grants an extraordinary remedy, which is essentially discretionary, although founded on legal injury. It is perfectly open for the writ court, exercising this flexible power to pass such orders as public interest dictates & equity projects. The legal formulat....
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....an opportunity to the parties to be heard, or violates the principles of natural justice. (3) The court issuing a writ of certiorari acts in exercise of a supervisory and not appellate jurisdiction. One consequence of this is that the court will not review findings of fact reached by the inferior court or tribunal, even if they be erroneous." 55. This Court explained that a court which has jurisdiction over a subject matter has jurisdiction to decide wrong as well as right, and when the Legislature does not choose to confer a right of appeal against that decision, it would be defeating its purpose and policy if a superior court were to rehear the case on the evidence and substitute its own finding in certiorari. 56. In Syed Yakoob v. K.S. Radhakrishnan, AIR 1964 SC 477, P.B. Gajendragadkar, CJ., speaking for the Constitution Bench, placed the matter beyond any position of doubt by holding that a writ of certiorari can be issued for correcting errors of jurisdiction committed by inferior courts or tribunals. The observations of this Court in para 7 are worth taking note of: "7. The question about the limits of the jurisdiction of High Courts in is....
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....red on the High Courts under Art. 226 to issue a writ of certiorari can be legitimately exercised....." 57. In Surya Dev Rai v. Ram Chandra Rai, (2003) 6 SCC 675, a Bench of two Judges held that the certiorari jurisdiction though available, should not be exercised as a matter of course. The High Court would be justified in refusing the writ of certiorari if no failure of justice had been occasioned. In exercising the certiorari jurisdiction, the procedure ordinarily followed by the High Court is to command the inferior court or tribunal to certify its record or proceedings to the High Court for its inspection so as to enable the High Court to determine, whether on the face of the record the inferior court has committed any of the errors as explained by this Court in Hari Vishnu Kamath v. Ahmad Ishaque, AIR 1955 SC 233 occasioning failure of justice." 16. At this juncture, this Court deems it appropriate to delineate the scope of interference by Court exercising its powers of judicial review in respect of a challenge pertaining to a decision taken by the experts of the field. It has been observed consistently by the Supreme Court in a number of judgments that the Court m....
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....al issues. The relevant portion of the Judgment is reproduced as under: "19. This Court being the guardian of fundamental rights is duty-bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court in all the aforesaid decisions has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This Court is normally loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts i....
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....sional under Section 217-220 of the IBC after following the due procedure. The contention of the Petitioner that the Board ought to have waited till the conclusion of the proceedings before the Appellate Tribunal does not have any merit. The function of the Board under the IBC are distinctive from the functions of the Appellate Authority which is in seisin of appeals from the Orders of the NCLT. The purpose of the IBBI is to look into the conduct of the resolution professional in the nature and manner of the performance of their duty. 22. The conduct of the Petitioner herein has been first scrutinized by the Investigating Authority which has found substantial deficiencies in the performance of the Petitioner inasmuch the Petitioner has failed to protect the assets of the Corporate Debtor and that there is a substantial delay in the submission of the forms by the Petitioner with the Board. Several instances of the failure on the part of the Petitioner have been found in failing to protect the assets of the company which are listed as under: A. Failure to preserve and protect the assets of the Corporate Debtors a) Dip in security Deposit given against rent of sho....