AI Structured Summary
Not yet generated for this judgment
Judgment
O R D E R
30.09.2022: This appeal is directed against the order dated 20.10.2020 by which an application bearing CA No. 640 of 2019 filed at the instance of Respondent No. 4 and 5, arrayed as such in C.A No. 366 of 2019, filed by the Appellant (RP), has been allowed.
Shorn of unnecessary details, an application under Section 9 of the Code was filed by M/s Hind Tradex Limited (Operational Creditor) against M/s Lakshmi Precision Screws Limited (Corporate Debtor) which was admitted on 18.07.2018 and the Appellant was appointed as IRP and thereafter RP.
The present Appellant filed an application under Section 60(5), 43, 44, 45, 66 and 67 of the Code in which various prayers have been made but the relevant prayers referred to by the Counsel for the Appellant are ‘b’ and ‘g’ which read as under:-
“b. Direct the respondent no. 2, respondent no. 3, responded no. 4 and respondent no. 5 (being the promoters and directors of the corporate debtor, in the control and management of the corporate debtor during the relevant period) to contribute an amount of 214.95 Crores to the assets of the corporate debtor (being the shortage of inventory determined by the RP)
(g)Direct the respondent no. 2, respondent no. 3, respondent no. 4 and respondent no. 5, respondent no. 6 and respondent no. 12-21 to contribute an amount of Rs. 81.84 Crores to the corporate debtor under Section 66 read with section 43 of the code.”
While the said application was pending before the Adjudicating Authority, the Respondent No. 4 and 5, the alleged erstwhile directors of the Corporate Debtor, filed an application under Section 60(5) bearing CA No. 604 of 2019 for deletion of their name from the array of the Respondents, inter alia, on the ground that they resigned on 29.11.2017 and their resignation was approved by the Board of Directors on 18.12.2017 whereas the CIRP was initiated much thereafter on 18.07.2018. The said application was contested by the present appellant by filing their reply. The Adjudicating Authority allowed the application vide the impugned order and hence this appeal.
Counsel for the Appellant has submitted that the Adjudicating Authority has committed an error in allowing the application by pre-judging the issue, raised in their application bearing CA No. 366 of 2019 as according to them the Respondents were also liable in regard to the deficiencies found in the inventory and also the loans to the related party. She has further submitted that the Adjudicating Authority has taken a prima facie view for the purpose of deleting the name of the Respondents whereas it was incumbent upon it to take a decision as to whether, on the basis of the evidence available on record, much less appended with the application bearing no. 366 of 2019, the Respondents No. 4 and 5 are really liable or not?
It is also argued that the Adjudicating Authority could not make its mind as to whether the present Respondents should be deleted finally or not because it has ultimately decided that in case it is found at any point of time that they were involved then they can again be impleaded as party.
In the background of the aforesaid facts and circumstances, Counsel for the Appellant has submitted that if the Adjudicating Authority is not sure about the involvement of the Respondents and was taking decision only on the basis of the resignation which came into effect from 18.12.2017, it should have heard the application filed by the Respondents bearing CA No. 604 of 2019 alongwith application filed by the Appellant CA No. 366 of 2019 and if at that time it is found from the appreciation of the evidence available on record that they are really not involved despite the allegations made by the Appellant, the application filed by the Respondent could have been allowed.
In reply, Counsel for Respondent has vehemently argued that there is no error in the impugned order. He has taken a cue from the fact that CIRP took place on 18.07.2018 whereas the Respondents resigned on 29.11.2017 and the resignation was approved by the Board of Directors on 18.12.2017, therefore, they were not on the scene when the CIRP took place and there is no whisper in the reply filed to their application as to how the Respondents are involved, therefore, there is no error in the impugned order which requires any interference by this court.
We have heard Counsel for the parties and perused the record with their able assistance.
From the resume of the aforesaid facts and circumstances, the issue which has arisen in this case travels in a narrow compass as to whether the impugned order is illegal on the ground that it has prejudged the issue involved, raised by the Appellant, in their application bearing no. 366 of 2019?
The facts are not in dispute that the present respondents were directors of the listed company. It is not in dispute that they had resigned on 29.11.2017, the resignation was accepted by the Board of Directors on 18.12.2017 and the CIRP was initiated on 18.07.2018 but the fact remains that the allegations against them of the deficiency in the inventory and the loan given to the related party are yet to be examined. These allegations can be decided only when the application bearing no. 366 of 2019 is decided in one way or other. But before that date it would not be justified to allow the Respondents to run away from the arena of contest only on the ground that they resigned much before the triggering of CIRP. It is also a matter of concern as to why the Respondents herein filed this application when the application filed by the Appellant was pending adjudication. One can imagine that they were afraid of the decision by the Adjudicating Authority, knowing fully well that they are involved in the transaction about which the application has been filed. In any case, the Adjudicating Authority should have heard both the application together in order to take a decision about the involvement of the Directors/Respondents in the affairs of the company as projected by the Appellant. Otherwise, for instance, if the names of the Respondents are allowed to be deleted at this stage and ultimately the Adjudicating Authority finds the involvement of the Respondents as directors while deciding the application CA No. 366 of 2019 then firstly the Adjudicating Authority shall have to record a finding in that regard, allow the impleadment of the Respondents, afford them opportunity to contest and then to take a decision which shall be sheer waistage of the precious time of the Court and shall make matter more complex.
In view of the aforesaid facts and circumstances, we are of the considered opinion that the present appeal is meritorious and the same is allowed and the impugned order is set aside. The matter is remanded back to the Adjudicating Authority to restore the application 604 of 2019 and decide the same on its merits alongwith application CA No. 366 of 2019 in accordance with law. It is needless to mention that we have not touched the merits of the case so far as the application bearing no. 366 of 2019 is concerned.
The parties are directed to appear before the Adjudicating Authority on the date already fixed in the application as well as main petition.