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Judgment
It is an MA filed by the IRP u/s.19(2) of the Insolvency and Bankruptcy Code, 2016 (the "Code") against one of the Financial Creditors (R6), which is an Asset Reconstruction Company, taken over possession of the asset (34 acres of land along with factory, building, plant and machinery) of the Corporate Debtor under SARFAESI proceedings on 08.09.2015 and also against R5, which is also another Company alleged to have entered into an Assignment Agreement and Custodian Agreement with the Financial Creditor (R6) for taking the custody of the aforementioned asset of the Corporate Debtor on payment of ₹2.16Crores as part consideration against full consideration of ₹3.8Crores as per the Assignment Agreement.
Now as per the Code, since the asset aforementioned still admittedly continuing as the asset of the Corporate Debtor without any change to the title of it, for the RP shall take custody of the asset as mentioned in Section 25 (2) of the Code, the RP has filed this MA u/s 19(2) of the Code seeking immediate custody and control of the asset aforementioned from R5, with whom it is lying.
By seeing the documents placed before this Bench, though it appears that the custody of the asset lying with R5 basing on the Assignment Agreement aforementioned through R6, which earlier taken over the possession of this asset from the Corporate Debtor under SARFAESI proceedings, it is evident till date ownership of the asset lying with the Corporate Debtor, whereby, this asset is still to be considered as the asset of the Corporate Debtor but not either as the asset of R6 or as the asset of R5.
Since the proceedings taken out under SARFAESI will not have any bearing on the CIRP initiated under the Code unless the title of the property of the Corporate Debtor has been fully conveyed either to the Financial Creditor or to the third party as stated under the SARFAESI Act, though part consideration has been passed between the parties, it will not become an impediment to the RP to take the custody and control of the assets as contemplated under Sec.25 (2) of the IBC.
Therefore for the reasons aforementioned, I hereby direct R5 to deliver the possession and custodial control over the asset of the Corporate Debtor to the RP within 10 days hereof. Accordingly, this application is hereby allowed.
As to second relief for production of the records of the Corporate Debtor from the erstwhile Directors (R1 to R4), the erstwhile Directors have come with vague submissions saying that the company records not lying with them because the asset was taken by R6 and then by R5, as the asset was taken over by R6 in the year 2015 itself, the counsel of them says, that the erstwhile directors already donated their shares to a Trust, therefore, they have no documents with them to provide to the RP.
As against this submission, the RP counsel has stated that though the Suspended Directors not filing their Annual Returns, Financial Statement with the RoC since long, they have been filing Income Tax Returns, GST Returns and maintaining Bank Accounts till Jan’2019 reflecting R1 as signatory of the Bank Accounts, for having R1 filing GST Returns and maintaining Bank Accounts, these Respondents now could not say that they are ignorant of the affairs and records of the Company on the premise that shares were transferred to the Trust by way of donation.
The end result of this logic is, the RP is unable to trace out records of the Corporate Debtor from the Suspended Directors till date. On there being no undertaking from these Respondents to provide records of the Company to the RP, this RP is entitled to seek assistance from the Chief Metropolitan Magistrate/Chief Judicial Magistrate/District Collector as contemplated under Section 19(2) r/w 429 of the Companies Act, 2013 for availing the required documents from these Suspended Directors.
Therefore this Bench hereby directs R1 to R4 to provide the required documents to the RP within 10 days hereof, failing which, this Bench hereby requests the District Collector of Madurai to provide assistance to the RP take custody of the records sought by the RP as well as any other assistance that is essential in discharging his functions as RP in the CIRP period as contemplated under Section 19(2) of IBC r/w 429 of the Companies Act, 2013.
Accordingly, this MA/381/2019 is hereby allowed.