Adv. (CA) V. Venkata Sivakumar vs S. Hari Karthik & Anr.

[Per: Shreesha Merla, Member (Technical)]

Challenge in this Appeal is to the Impugned Order dated 28.04.2023 passed by the ‘Adjudicating Authority’, National Company Law Tribunal, Chennai Bench-II, in IA/755/2022 in CP/1307/IB/2018, whereby and whereunder the Adjudicating Authority has made some observations against the erstwhile Liquidator / Mr. V. Venkata Sivakumar / the Appellant herein and directed the Registry to forward a copy of the compliance affidavit and the report of the Court Commissioner to IBBI and Insolvency Professional Agency. The observations, in the Impugned Order, relevant to this Appeal, are extracted as hereunder:

Mr. V. Venkata Sivakumar, the erstwhile Liquidator, submitted that he was not present during the hearing and an adverse Order was passed without giving the Appellant an opportunity of being heard. It is submitted that the Order in IA. No. 815 / 2023 was reserved on 22.03.2022 but was uploaded only on 06.07.2022, giving seven days’ time from 01.07.2022 to handover the control and custody of all documents and assets of the Corporate Debtor to the new Liquidator. It is submitted that the Appellant was ready with all the records and documents on 16.07.2022 but could handover the same only on 25.03.2023 because the First Respondent / the new Liquidator after the Second meeting on 03.08.2022, suggested that the sensitive documents be digitalised, but thereafter, did not get in touch with him, but sent defamatory mails as a result of which he is now facing Criminal Trial.

It is further submitted that vide Order dated 23.12.2022, an Advocate Commissioner was appointed by the Adjudicating Authority who completed his work on 25.03.2023 by spending just 10 hours recording the cooperation of the Appellant. It is submitted that the Adjudicating Authority without applying its judicial mind, concluded that the letter dated 18.03.2023 was written by the Appellant and failed to recognise the complete breakdown of the Liquidation Process and passed the following adverse Order:

It is submitted that the aforenoted observations were made by the Adjudicating Authority ignoring the Advocate Commissioner’s report. It is submitted that the Advocate Commissioner reached the factory at 10.00 AM and left at 05.00 PM after having lunch for 2 hours with one legal assistant and therefore, the said increase from Rs. 50,000/- to Rs. 4,00,000/- as remuneration, is unjustified. It is submitted that the new Liquidator is in the habit of making false statements.

Learned Counsel for the First Respondent / the new Liquidator submitted that the Adjudicating Authority had, by a reasoned Order dated 01.07.2022, replaced the Appellant on specific grounds, and directed him to handover the control and custody of the Corporate Debtor and its records within seven days from the date of Order dated 01.07.2022; that the Appellant instead of complying with the said Order moved an Application IA(IBC)/754/2022 seeking an extension of 30 days for compliance; that the new Liquidator filed an Application IA No. 755/2022 for direction to the Appellant to handover the documents for a smooth transition. When the Impugned matter came up for hearing on 15.07.2022, the adjudicating Authority directed both parties to meet physically and fix the time and date based on the assurance that the Appellant had given that he was ready to give charge to the First Respondent. Further extension of time was declined. It is submitted that the Appellant handed over only a few selected documents and requested additional time to handover the balance documents and despite his assurance made before the Adjudicating Authority, did not do so. R1 filed a compliance affidavit vide Diary No. 5005 dated 16.08.2022 after serving the same to the Appellant.

After the appointment of the Advocate Commissioner an Interim Report was filed on 23.01.2023 and a final report on 26.04.2023. In response to the final report, R1 filed an Affidavit on 28.04.2023 after serving the same to the Appellant. It is argued by the Learned Counsel for R1 that the documents received and the documents yet to be handed over was listed clearly. On 28.04.2023, both the Respondents appeared but the Appellant had failed to appear and the Impugned Order was passed. It is submitted that the Appellant had never raised any objection or filed any reply to the Impugned Application or Affidavits filed by R1 during the 8 ½ months of proceedings before the Adjudicating Authority. It is also submitted that the Appellant is strangely questioning the working hours of the court appointed Advocate Commissioner and his fees which is unwarranted. It is also submitted that the Appellant was never present during several hearings and despite being the IRP, RP and subsequently the Liquidator, the Appellant did not have any stock sheet to show the records or assets of the Corporate Debtor taken over during his tenure. Learned Counsel submitted that all scandalous remarks made against the First Respondent and other parties in the grounds of Appeal be expunged.

The short point which falls for consideration in this Appeal is whether the Adjudicating Authority was justified in making some observations against the erstwhile Liquidator / the Appellant herein, and directing the Registry to forward a copy of the Compliance Affidavit and report of the Court Commissioner to IBBI.

It is the main case of the Appellant that without adhering to Principles of Natural Justice, the Impugned Order was passed on 28.04.2023 in his absence. It is seen from the record that hearings were held on 15.07.2022, 16.08.2022, 28.10.2022, 19.12.2022, 23.12.2022, on which date the Advocate Commissioner was appointed, and thereafter on 31.01.2023, 23.03.2023 and finally on 28.04.2023, on which specific date the Impugned Order was passed and the Appellant was absent. A brief perusal of the Order dated 15.07.2022, passed in IA Nos. 754 & 755 / 2022 shows that the Adjudicating Authority had earlier directed the Appellant vide Order dated 01.07.2022 herein to handover the control and custody of the books of accounts, statutory records and registers of the Corporate Debtor without any delay, but on account of non-compliance by the Appellant herein, the new Liquidator filed IA No. 755 / 2022, seeking compliance and the Appellant filed IA No. 754 / 2022 seeking extension of 30 days from the date of receipt of the Order, for compliance. The Adjudicating Authority, while denying extension dismissed IA No. 754 / 2022. In IA No. 755 / 2022, the Adjudicating Authority posted the matter for hearing on 16.08.2022 and in the meantime, directed both the parties to meet personally and cooperate with each other. The Appellant was present and heard on all these dates.

It is significant to mention that in the Order dated 23.12.2022, when the Appellant was heard, an Advocate Commissioner Mr. B. Dhanaraj was appointed to take stock of what documents have been submitted and list the documents that are still to be handed over by the Appellant to the new Liquidator. The facts of the case establish that this situation of stalemate between the parties had necessitated the appointment of this Advocate Commissioner. The Application IA No. 755 / 2022 was further listed for hearing on 31.01.2023. On 25.04.2023, the final report of the Advocate Commissioner was filed. It is submitted by the Appellant that the Advocate Commissioner had mentioned in his report that there was good cooperation from the staff of the new Liquidator for smooth transition of the records, which was ignored by the Adjudicating Authority. It is clear from the report and the Orders that it was only after the appointment of the Advocate Commissioner that the records were handed over to the new Liquidator. The contention of the Appellant that the Advocate Commissioner had only spent a couple of hours and there is no justification for increasing the fees from Rs. 50,000/- to Rs.4,00,000/-, is not relevant to the facts and circumstances of the case on hand. The question here is whether the observations made by the Adjudicating Authority regarding the conduct of the Appellant, is justified and not the fee of the Advocate Commissioner.

The chronology of dates and events establishes that the Appellant was present and heard on several dates specifically regarding the issue on hand. It is pertinent to mention that when the Advocate Commissioner was appointed to facilitate the handover of the documents and implement the Order of the Adjudicating Authority regarding the transition of the control and custody of the statements, records and assets of the Corporate Debtor Company, there was no whisper of protest by the Appellant herein or any bonafide submission before the Adjudicating Authority that the transition would be done within the time frame given by the Adjudicating Authority. The fact that one weeks’ time was given and thereafter, the Adjudicating Authority had directed both the parties to meet, cooperate and implement the Order is not denied. It is not in dispute that 8 ½ months had lapsed from the date the new Liquidator was appointed. Infact, the Advocate Commissioner had written in his report that a list of Registers, files, books, vouchers, cheque books, etc. A total list of 377 items was made. Keeping in view these facts and circumstances of the attendant case on hand, we are of the considered view that the Appellant was very much present for all previous hearings, relevant to the matter on hand, the Advocate Commissioner was appointed only on account of the situation which has arisen based on the non-handing over of the said documents to the new Liquidator / First Respondent, and therefore, his contention that Principles of Natural Justice was not adhered to, is untenable.

For all the fore going reasons, we do not find any illegality or infirmity in the Impugned Order. This Appeal is dismissed. No Order as to costs. Needless to add, the Appellant is at liberty to raise all issues before the IBBI, in support of his case.