Kanchan Dutta vs Om Prakash Pandey & Anr.

PER: Harish Chander Suri, Member (Technical):

This Court convened through video conferencing.

By way of this Interlocutory Application (IBC)/ 1430 (KB) 2020 has been filed by the Applicant under section Under Section 70 of the Insolvency and Bankruptcy Code, 2016, The RP of Shree Ram Saw Mill Private Limited submitted that the Financial Creditor had filed a petition under section 7 of the IBC against the Corporate Debtor, which was heard and admitted on 16^th March, 2020. It is further submitted that vide the said order, the Applicant was appointed as the Interim Resolution Professional. Public Announcement was made by the applicant under section 15 of the IBC,2016 via publication in an English Newspaper ‘Business Standard’ and a ‘ Bengali Newspaper ‘Aajkal’ on 18^th March, 2020.

It is submitted that the applicant vide emails dated 18^th March, 2020, 12^th May 2020, 12^th May 2020, 23^rd May 2020, 9^th June, 2020, 18^th June, 2020, 30^th June 2020, 8^th July, 2020 and 14^th July 2020 intimated the Directors of the Corporate Debtor about the initiation of CIRP against the Corporate Debtor; appointment of the Applicant as the IRP; the complete procedure and consequences of the CIRP; and sought for all the necessary information and documents relating to the assets, finances, and operations of the Corporate Debtor, all detailed information about accounts, tally software, bank account details, statements of bank accounts etc. 4. It is submitted that the RP visited the Factory Office and Registered Office on 18^th March, 2020 and 13^th July 2020 and asked for all the detailed information and cooperation of the respondent directors. Though the same was assured by the directors, none was provided. The meeting of 13^th July 2020 was specifically fixed for getting access to the Tally Software. When the RP and his team were present, the computer did not function at all. It is further submitted that Bank account statement, statutory registers, financial statements, books of accounts (last available as per MCA is 2013) sought for from the directors have not been provided. 5. It is submitted that the Directors were not at all cooperating with the Applicant in the CIRP of the Corporate Debtor and hence the Applicant was compelled to file an application under Section 19 seeking necessary directions upon the directors of the Corporate Debtor to provide all the information and documents as sought for by the Applicant. It is submitted that the said application under section 19 was heard by this Hon’ble Tribunal on 7^th October, 2020 when directions were passed on the Respondents for rendering all necessary support to the Applicant and to provide all documents. 6. It is submitted that the applicant communicated the order dated 7^th October 2020 to the Respondents and sought for detailed information in terms of the directions given by this Adjudicating Authority on 7^th October, 2020, but however, there was no response from the Respondents.

It is further submitted that even after repeated requests of the RP to the Directors, the Directors of the Corporate Debtor did not cooperate with the RP and even violated the order of this Adjudicating Authority issued on 7^th October, 2020.

It is further submitted that after exchanging few mails between the RP and Directors of the Corporate Debtor, the representative of the RP visited the office of the Corporate Debtor on 20^th October and met Mr. O.P. Pandey (Respondent No.1) who was present at that time and learnt that the documents were not ready, and yet promised to submit the documents by next day. But no documents were received by the RP until 2^nd November,2020 save and except audited accounts for the Financial Years 2013-14 to 2016-17 & 2018-18, PAN Card, Name and Address of the Directors, Name of the Banks and List of Shareholders as on 31.03.2017.

It is further submitted that the matter was again listed before this Adjudicating Authority on 5^th November, 2020 when the RP submitted about the non compliance of the order dated 7^th October, 2020 by the Respondents and this Adjudicating Authority after considering the said order and submission of the RP, directed the Respondents to be present at the hearing scheduled on 30^th December, 2020.The RP states that this deliberate act is a clear violation of section 70 of the Code and hence the Applicant is filing the instant application for punitive actions against the Respondents for blatant violation of the Code and not rendering any cooperation to the RP.

The applicant has sought the following reliefs:-

In reply to the petition,the respondents filed affidavit and submitted that all the allegations made in the application are categorically denied. It is submitted that the application is not maintainable. The respondents submit that on 16/03/2020, this Adjudicating Authority has passed order of moratorium. It is submitted that once the board is suspended only RP deals with the Bank and the Bank constitutes itself as CoC or joins as a member of the COC, hence the contention is incorrect and liable to be rejected in limine.

It is submitted that as per the admitted position of the applicant in para 30 of the application, he has already received audited accounts for the Financial Years 2013-14, 2014-15, 2015-16, 2016-17 and 2018-1, PAN Card and other details and as such the contentions are incorrect and liable to be dismissed. It is stated that the Financial Years 2018-2019 was also submitted and in any case audited Balance sheet of Financial Year 2018-19 also have details of Financial Year Financial Year 2017-18. It is submitted that the contentions of the applicant are frivolous inasmuch as the Bank is part of the CoC and the management of the Corporate Debtor has been vested with RP and hence the details of Bank may be procured by him. Further, audited Balance Sheets have all the details of fixed assets and stocks and as such the contentions are mere harassing design rather than any constructive purpose for the CIRP.

The defiant attitude of the Respondents is clearly visible from the in action and delaying tactics adopted by the respondents just to by a further time. The Respondents have time and again been directed to hand over the documents, Bank account statements statutory register financial statements, the books of accounts last available as per the MCA and all other information about accounts in tally software but none of the directions of this Adjudicating Authority have been followed by the Respondents, which is a very serious matter and may lead to frustrate the basic object desired to be achieved by the Code.

There is no doubt that these two Respondents had the intentions from the very beginning not to obey and comply with the directions of this Adjudicating Authority. Their inaction and disobedience amounts to misconduct as defined under Section 70 of the IBC. Prima-facie they appear to have committed contempt of this Court. However, before proceeding further, we deem it appropriate to issue notice to these Respondents, namely, Om Prakash Pandey and Shri Prakash Pandey and direct their personal appearance, on 31.08.2022.

Let a notice be sent to the Respondents for the said date.

This application filed under section 425 of the Companies Act, 2013 and Section 60(5) of the Insolvency and Bankruptcy Code, 2016 and Rule 11 of the NCLT Rules, 2016.

It is submitted that there was continuous non co-operation from the Directors of the Corporate Debtor and the Directors failed to submit all the relevant documents/information as required by the Interim Resolution Professional/Resolution Professional required for CIRP of the Corporate Debtor of the Corporate Debtor.

It is submitted that the RP had filed an application under section 19 of the Code praying for directions upon the Contemnors to cooperate with the Resolution Professional and when the matter was heard on 7^th October, 2020, directions were passed upon the contemnors to handover all necessary documents and books of accounts to the RP(Presently Liquidator). It is further submitted that thereafter a series of emails were exchanged with the Directors/ Contemnors but all the documents as sought for was not provided. The matter was listed before this Adjudicating Authority on 5^th November, 2020 when the RP informed this Adjudicating Authority about the non compliance of order dated 7^th October, 2020 by the Directors of the suspended board of the Corporate Debtor and this Adjudicating Authority directed the Directors/contemnors to remain present at the hearing on 30^th December, 2020 and report compliance. It is further submitted that Directors in spite of having knowledge of the order dated 5^th November,2020 failed to provide any information to the RP.

It is submitted that due to the continuous, intentional, deliberate non-cooperation, was compelled to file an application under section 70 of the IBC.The said application was heard on 18^th March, 2021 and this Adjudicating Authority directed that a joint meeting will be held on 20^th March 2021 when all the documents will be handed over by the contemnors.

It is submitted that the joint meeting was held on 20^th March, 2021 which was attended by the Liquidator, the Contemnor no.1 (Director), Advocate of the Liquidator and Advocate of Contemnor no.1 and 2 and members from the liquidator team. It was agreed that the Respondent Directors/ Contemnors would provide the information without fail within a period of 7 days from the date of the meeting.

It is further submitted that Liquidator vide its email dated 26^th March, 2021 informed the Contemnors as well as the Advocate of the Contemnors that he will send his representatives on 27^th March, 2021 at 11 am at the Registered Office of the Corporate Debtor to collect the documents as per the letter dated 19^th March,2021. The RP vide his email dated 27^th March, 2021 placed on record that there was no response to his email of 26^th March, 2021 and no documents were handed over.

It is submitted that section 70 application was listed on 5^th April, 2021 when the contemnors were directed to be present vide e-hearing on the next date which was fixed on 7^th April, 2021.In the e-hearing on 7^th April, 2021, the contemnors/Directors appeared before this Adjudicating Authority, and agreed and undertook to cooperate and provide all documents sought for by the Liquidator within 15 days. The 15^th day expired on 22^nd April,2021 but no information was provided.

It is submitted that pursuant to the directions of this Adjudicating Authority and the assurances given by the Contemnors, the Liquidator vide its letters dated 3^rd May, 2021, 21^st May 2021, 16^th June 2021 and 28^th July,2021 called upon the Contemnors to provide all the documents but no document or information has been provided. The Applicant stated that there is clear violation of the order dated 7^th October, 2020, 18^th March, 2021 and 7^th April, 2021. Such violation is intentional and deliberate. The RP/applicant has thus prayed for initiation of initiation of contempt proceeding against the contemnors/ Respondents for willfully and deliberately disobeying the aforesaid orders of this Adjudicating Authority passed in IA No. 703 of 2020 and IA No. 1430 of 2020 and Issuance of appropriate rule against the contemnors; and in case of dissatisfactory explanation or insufficient cause being shown, such rule be made absolute with appropriate penal sanction as this Adjudicating Authority may deem fit and proper;It is further prayed that Contemnors be directed to comply with orders dated 7^th October,2020 (in IA No. 703 of 2020), 18^th March, 2021 and 7^th April, 2021( in IA No. 1430 of 2020) of this Adjudicating Authority within a period of 7 days in the interest of justice; Initiate inspection of the books of the Corporate Debtor under Section 210 of the Companies Act, 2013.

For the purpose of dealing with the issues involved, this Adjudicating Authority will have to first ascertain whether the contemnors named in this application have actually intended to commit contempt of this Adjudicating Authority by willfully or deliberately disobeying the orders passed by this Adjudicating Authority from time to time. For this purpose, the relevant extract of the orders passed by this bench are reproduced as under:-

On 25^th November, 2021 while referring to the previous orders whereby these two suspended members of the Board of Directors of the Corporate Debtor Mr. Om Prakash Pandey and Mr. Shree Prakash Pandey has been directed to comply with the orders, which was informed by the Ld. Counsel for the Liquidator that they had not turned up or handover any documents or information to the Liquidator as directed on 7^th April, 2021. Therefore, in the order dated 25^th November, 2021, it was recorded as under:-

On 15^th February, 2022, when this Contempt Application was listed before this Adjudicating Authority, the Ld. Counsel for the respondent sought 10 days’ time to file reply and the matter was posted for hearing on 2^nd March,2022. On 2^nd March, 2022, it was recorded by this Bench that the respondents had handover some documents relating to the Corporate Debtor to the Liquidator and that these documents shall be examined by the Liquidator by the Liquidator and if any other documents are required from the respondents, the Liquidator will send an e-mail to the respondents for such handing over those documents to the Liquidator.

The matter was then listed on 22^nd March, 2022, the Respondents was present in court and they were directed to meet the Liquidator in the evening at 5 P.M. at his office and give an information required by the Liquidator and if there are any documents to be handed over to the Liquidator, the same can be handed over within two day.

Finally the matter was posted on 28^th March, 2022 both the aforesaid suspended Directors were present when the Liquidator informed this Adjudicating Authority that the information given by the Respondents was not to the satisfaction of the Liquidator and that there is much more required to be given by the Contemnors.

Before taking any further action, this Bench thought it proper to give another chance to provide all the information to the Liquidators within three days. Therefore, we directed the respondents to go to the office of the Liquidator, the next date and handover whatever information they have to the Liquidator in the supervision of one independent person Mr. Rohit Kumar Keshari, Advocate who was appointed as Special Officer. The matter was thereafter posted for 7^th April, 2022

The Special Officer in its report dated 6^th April, 2022 has submitted his report. The relevant extract of the Report is mentioned as under:-

Mr. O.P. Pandey representing the Suspended Board of Directors assured that in furtherance to the aforesaid documents already handed over further following documents/ Details he will provided:-

Sale Bill ( for the period 2015-2016)- Due not submitted by 04.04.2022

Custody of the Vehicle and Machines by 04.04.2022,

Cash as per Ledger ( approximately Rs. 29,000) will be hand over to the Liquidator on 05.04.2022 by 10 am.

The Identification of stock of the Company will be done by Mr. Pandey to Mr. Dutta on 04.04.2022.

Copies of the email Communication between the parties since 29.03.2022 to 05.03.2022 is annexed as Annexure “A-1”.

But Mr. Om Prakash Pandey unable to hand over any documents/ information as per the aforesaid Query/details in paragraph 9 of this Report and in place of the same he send an email on 05.04.2022 around 3.45 P.M. which itself self explanatory. A Copy of the instant email is annexed as Annexure- “A-2”.

In furtherance to the aforesaid facts, it is stated that the other member of the suspended Board never turned up a single day, but his Legal representative stated that has recently got operated so unable to come physically”

From the report of the Special Officer, it would be revealed that the Respondents have failed to provide the following items:-

In view of the commitment of Mr. O.P.Pandey, one of the suspended Directors, was directed to hand over the aforesaid items, which he had assured to give but not given so far.

In spite of the aforesaid assurance of the Respondent Mr. O.P.Pandey, the aforesaid items have not been handed over thereby violating the orders of this Adjudicating Authority.

We, therefore, issue notice to the Respondents, namely, Om Prakash Pandey and Shri Prakash Pandey to appear before this Adjudicating Authority personally on 31/08/2022.

Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.