S Z Deshmukh & Co. vs VOVL Limited

,,,

This is an Application filed under section 19(2) read with section 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the",,,

IBC) by the Resolution Professional of the Corporate Debtor VOVL Limited against the Directors of the Corporate Debtor seeking necessary,,,

direction for cooperation.,,,

The Operational Creditor has filed the captioned C.P. (IB) 2742(MB) of 2019 in this Tribunal, and the Corporate Insolvency Resolution Process",,,

(CIRP) of the Corporate Debtor commenced vide order dated 8 November 2019 passed by this Adjudicating Authority. Mr. Rakesh Rameshwar,,,

having registration number IBBI/IPA-001/IP-P00696/ 2017-18/1211 appointed as the Interim Resolution Professional (IRP). The IRP convened the,,,

first meeting of the Committee of Creditors (COC) of the Corporate Debtor on 20 December 2019. The COC inter alia resolved unanimously to,,,

appoint the Applicant herein as the Resolution Professional and authorised State Bank of India, one of its members, to file the necessary Application in",,,

this Tribunal for confirmation of such appointment. The State Bank of India, on 2 January 2020, filed M.A. No. 23 of 2020 before this Tribunal",,,

seeking appointment of the Applicant as the Resolution Professional. This Tribunal by an order dated 20th January 2020 approved the same, the copy",,,

of which he received on 4th February, 2020.",,,

Meanwhile the IRP had taken necessary steps in furtherance of the CIRP. The IRP addressed a letter dated 22 November 2019 to the suspended,,,

Directors (including the Respondent Nos. 1 to 3 herein), personnel and erstwhile management of the Corporate Debtor (“22 Nov Letterâ€) seeking",,,

various documents and information for the purpose of taking charge and for managing the assets and affairs of the Corporate Debtor including but not,,,

limited to the assets, finances and operations of the Corporate Debtor. The IRP also annexed to the said letter, a copy of the Admission Order and the",,,

Public Notice issued by him in terms of the requirement under the IBC. The IRP did not receive any response to the 22 Nov Letter from any of the,,,

recipients thereto, including the Respondents. Accordingly, the IRP re-sent the 22 Nov Letter to the Respondent Nos. 1, 2 and 3 by emails dated 17",,,

December 2019. The IRP then addressed emails dated 3 January 2020 and 20 January 2020 to the Respondent Nos. 1, 2 and 3, once again requesting",,,

that the information and documents be provided to him, to no avail.",,,

It is submitted that the Applicant has not been provided with necessary information and assistance by the Respondents despite repeated requests,,,

and instructions by the Applicant since December 2019 and thereafter since 6 February 2020. The lack of information and support from the,,,

Respondents has seriously jeopardized the CIRP, which has further been exacerbated by the time lost on account of the COVID-19 Pandemic.",,,

Despite the easing of the lockdown restrictions by the Central Government and respective State Governments, the Respondents have continued to not",,,

cooperate and comply with the directions and requests of the Applicant, as a result of which several key steps in the CIRP have been held-up,",,,

including the finalisation of the Information Memorandum (IM).,,,

At the outset, the Applicant states that although the present Application was ready for filing in the third week of March 2020, the Applicant was",,,

unable to file the same since this Hon’ble Tribunal was closed for judicial work on account of the Pandemic.,,,

Submissions Made by Applicant by way of Interlocutory Application:,,,

The Corporate Debtor is inter alia engaged in the business of investing in and holding offshore oil and gas assets through its direct and indirect,,,

subsidiaries and is a wholly owned subsidiary of Videocon Industries Limited (“VILâ€), which is also under CIRP as part of the Videocon",,,

Group’s Corporate Insolvency Proceedings under the IBC before this Tribunal. The CIRP of the Corporate Debtor herein is not part of the,,,

Videocon Group’s consolidated “group insolvency†proceedings. The Corporate Debtor holds, indirectly through its subsidiaries, participating",,,

interest in oil and gas blocks in Federative Republic of Brazil (“Brazilâ€) through a downstream joint-venture with group company of Bharat,,,

Petroleum Corporation Limited in Brazil and by itself Republic of Indonesia (“Indonesiaâ€). The Corporate Debtor is the majority shareholder,,,

(99% shareholding) of Videocon Hydrocarbon Holdings Limited (“VHHLâ€), which in turn holds 100% of equity shares of Videocon Energy",,,

Brazil Limited (“VEBLâ€), and VEBL is a 50% joint venture partner in IBV Brasil Petróleo Ltd. (“IBVâ€) which holds participating interests",,,

in various oil and gas assets in Campos, Sergipe and Potiguar basins in Brazil. With respect to Indonesia, VHHL holds 100% of the equity shares of",,,

Videocon Indonesia Nunukan Inc (“VINIâ€​), which holds participating interest in oil and gas assets in the Nunukan basin of Indonesia.",,,

Immediately upon taking charge as the Resolution Professional, the Applicant addressed a letter dated 6 February 2020 to each of the Respondents",,,

(“6 Feb Letterâ€) informing them of the Applicant’s appointment as the Resolution Professional and inter alia requesting for various documents,,,

and information pertaining to the Corporate Debtor including but not limited to the financials, bank accounts, details of subsidiaries, list of assets,",,,

valuation of assets, details of ongoing projects, cash flow management, details of employees, organisation chart, list of customers, receivables and",,,

payables, ongoing litigations, charge filings and DSCs of suspended directors. The Applicant also specifically informed each of the Respondents in the",,,

said 6 Feb Letter of their responsibility to cooperate with and assist the Applicant in terms of Section 19 of the IBC.,,,

In addition to dispatching the 6 Feb Letter by Registered Post/ Speed Post A.D. the Applicant also sent a scanned copy of the 6 Feb Letter along,,,

with this Hon’ble Tribunal’s order dated 20 January 2020 to each the Respondents by separate emails, also dated 6 February 2020.",,,

The Applicant states that not only have each of the Respondents failed to respond to or even acknowledge the 6 Feb Letter, the Respondent Nos. 1",,,

and 2 even refused receipt of the 6 Feb Letter, which action is in itself a clear breach of the obligation and duty of the Respondent Nos. 1 and 2 as",,,

suspended Directors of the Corporate Debtor towards the Applicant.,,,

Despite the CIRP of the Corporate Debtor having commenced on 8 November 2019, even after a period of nearly 3 months, the Applicant was",,,

not in possession of even the most rudimentary and basic information with respect to the finances, assets and operations of the Corporate Debtor to",,,

enable the Applicant to manage the affairs of the Corporate Debtor in accordance with the IBC and conduct the CIRP of the Corporate Debtor in,,,

accordance therewith. Owing to the studied silence of the Respondents in providing information despite several requests, requisitions, reminders and",,,

letters by the IRP as well as the Applicant, the Applicant addressed a letter dated 4 March 2020 to the Respondent No. 5, a suspended Managing",,,

Director of the Board of VIL and the erstwhile promoter of the Corporate Debtor, attaching therewith a list of documents required by the Applicant to",,,

carry out the CIRP of the Corporate Debtor.,,,

By a second letter, also dated 4 March 2020 addressed by the Applicant to the Respondent No. 5, the Applicant sought the names and contact",,,

details of authorised persons/ points of contact in various downstream direct and indirect subsidiaries of the Corporate Debtor concerning its offshore,,,

oil and gas assets.,,,

The Applicant also issued separate letters dated 4 March 2020 to each of the Respondents requesting each of them to provide the documents set,,,

out in the list of documents annexed to the said letters, which are required by the Applicant to carry out the CIRP of the Corporate Debtor.",,,

On 18 March 2020, the Applicant had telephonic discussions with Respondent No. 5, pursuant to which the Applicant received an email dated 18",,,

March 2020 from the Respondent No. 4 with the following documents:,,,

i. Balance sheet as on 31-03-2018,,,

ii. Income Tax Return Copy for AY 2018-19,,,

iii. ITR Acknowledgment copy for AY 2018-19,,,

iv. Tax Audit Report for AY 2018-19,,,

v. GST registration certificate,,,

vi. MOA and AOA of the Company,,,

vii. PAN : AADCV1810B,,,

viii. TAN : MUMV19018G,,,

ix. TAN return filled Form 27A,,,

x. Certificate of Incorporation after Name change,,,

xi. Details of Investments as on 31-03-2018,,,

However, the information provided pertains to the financial year 2017-2018, and no data for financial years 2018-19 and 2019-2020 was made",,,

available. Therefore, the Applicant states that the bulk of the information and documents sought from the Respondents has still not been provided to",,,

the Applicant by the Respondents and continues to remain unavailable.,,,

Thereafter, by emails dated 17 March 2020 sent by the Applicant to Respondent No. 5 and Respondent No. 6, the Managing Director of VHHL",,,

and an erstwhile promoter of the Corporate Debtor, the Applicant sought additional information (i.e. in addition to the information/ documents",,,

requested in the Applicant’s letter dated 4 March 2020). As on the date of this Application, the Applicant had not received a response to the said",,,

emails dated 17 March 2020 or the information sought therein.,,,

By an email dated 25 March 2020 sent by the Applicant to the Respondent No. 4, the Applicant sought the balance information. By an email dated",,,

26 March 2020 sent by Respondent No. 4, the Applicant was informed that Respondent No. 4 is in the process of compiling the information sought by",,,

the Applicant but that Respondent No. 4’s office is shut due to the lockdown resulting from Covid-19. Respondent No. 4 stated that they would,,,

provide the documents and information sought once the Covid-19 lockdown eases. The Applicant addressed a further email dated 26 March 2020 to,,,

Respondent No. 4 requesting Respondent No. 4 to provide the information as soon as possible since there has already been a significant delay.,,,

By an email dated 27 March 2020 sent by the Applicant inter alia to Respondent No. 5, scanned copies of the two letters dated 4 March 2020",,,

were once again sent to the Respondent No. 5, requesting him to acknowledge the email and provide the required data and information at the earliest",,,

so that the Applicant is able to conduct the CIRP of the Corporate Debtor effectively.,,,

Thereafter, by an email dated 16 April 2020 sent by the Applicant inter alia to Respondent No. 5, the Applicant once again sought the following",,,

documents from Respondent No. 5 for the purposes of preparing the Information Memorandum of the Corporate Debtor in accordance with the IBC:,,,

i. Audited financials for FY 2019 of the VOVL group (i.e. including of subsidiaries such as VEBL, VHHL, VINI and JVs of the group);",,,

ii. Status on audit of FY 2020 of VOVL and its subsidiaries;,,,

iii. Books of accounts, including detailed trial balance and bank statements of VOVL group and statutory registers and contact persons;",,,

iv. Consolidated and standalone financials of the Corporate Debtor as on FY 2019 and FY 2020;,,,

v. Details of other creditors in the presentation (slide 2) attached to the email and the latest position on liabilities of VOVL group along with details;,,,

vi. Complete liability entity wise for each of the VOVL group companies; and,,,

vii. Whether liabilities of VHHL towards banks includes any lenders other than IDBI & Exim Bank.,,,

By an email dated 22 May 2020 sent by the Applicant inter alia to Respondent No. 5, the Applicant sought calculations and workings for the",,,

purpose of calculating the TDS return of the Corporate Debtor for the period since commencement of CIRP.,,,

Thereafter, by an email dated 13 June 2020 sent by the Applicant to Respondent No. 4, the Applicant has once again followed up with Respondent",,,

No. 4 for the information and documents request since the lockdown pursuant to the Covid-19 pandemic has now eased. Respondent No. 4 had,,,

informed the Applicant on 26 March 2020 that they were unable to provide the documents and information as a result of the lockdown. The Applicant,,,

directed Respondent No. 4 to provide the documents and information at the earliest since it was now possible for Respondent No. 4 to visit their office,,,

and access the relevant documents and information.,,,

By emails dated 13 June 2020 sent by the Applicant to Respondent No. 4, 5 and 6, respectively, the Applicant has sought certain additional",,,

documents relating to the subsidiaries of the Applicant.,,,

The Applicant states that as a result of the Respondents’ failure to assist and cooperate with the Applicant, the Applicant has been unable to",,,

prepare the IM of the Corporate Debtor as per the requirement under the IBC. The Applicant states that the status of the information memorandum,,,

and the missing information is as follows:,,,

Sl.

No.","Information as

per Regulation

36 of the CIRP

Regulations","Status of

Information",Remarks

1.,"Assets and

liabilities","Complete details

not available","Only partial

information

relating to the

offshore

oil and gas assets

is available

2.,"Latest annual

financial

statement",Not available,"Only balance sheet

for FY ending 31

March 2017

and 31 March 2018

is available. Balance

sheet for FY ending

31 March 2019 not

available.

3.,"Annual financial

statements for the

last two financial

years",Not available,"Only balance sheet

for FY ending 31

March 2017

and 31 March 2018

is available. Balance

sheet for FY ending

31 March 2019 not

available.

4.,"Provisional

financial

statement for FY

ending 31 March

2020",Not available,-

5.,List of creditors,Available,"Details of creditors

who have not filed

their claims with

the Applicant is

not available in the

absence of the

balance sheet for

FY ending 31

March ’19

6.,"Particulars of debt

due to the

Corporate Debtor

from related

parties","Complete details

not available","Related party details

as per the balance

sheet for FY ending

31 March 2018 is

available

7.,"Details of

guarantees in

relation to the

debts of the

Corporate Debtor","Complete details

not available","Relevant data from

balance for FY

ending 31 March

2018 and data

obtained from the

MCA portal has

been included in the

draft Information

Memorandum,

however further

details/ clarifications

are still required

8.,"Details of all

material litigations

and ongoing

investigations by

government and

statutory

authorities","Complete

information not

available","Data from balance

for FY ending 31

March 2018 and

from the website of

the Income Tax

portal has been

included in the

Information

Memorandum.

Applicant has not

been provided

specific details of

any other material

litigation.

9.,"Shareholders

holdings at least

1% stake in the

Corporate Debtor",Available,-

10.,"Number of

workers and

employees and

liabilities of the

Corporate Debtor

towards them",Not available,"Applicant has no

data relating to the

workers and

employees of the

Corporate Debtor.

independently or whether it is to be consolidated with the CIRP of its holding company. If the CIRP of the Corporate Debtor is consolidated with the,,,

CIRP of its holding company then the present Applicant would not be the Resolution Professional and would therefore have no jurisdiction. These are,,,

material facts which ought to have been brought on record by the Applicant. He thus is not entitled to any reliefs having not approached this Tribunal,,,

with clean hands.,,,

The Respondent has relied on the following judgment:,,,

i. Brihan Karan Sugar Syndicate Private Limited & Anr v. Karmaveer Shankarrao Kale Shahakari Sakhar Karkhana Limited 2018(3) Mah,,,

LJ 746, more particularly paragraphs 22 & 23.",,,

In paragraph 29 of the captioned application (page 21 of the IA) the Applicant states that “a consolidated list of all the information and,,,

documents sought by the Applicant from the Respondents and which has not been provided is hereto annexed and marked as Exhibit Wâ€​.,,,

This statement has also been confirmed to be true through the verification clause at the end of the application as well as in the General Affidavit in,,,

Support thereto. However, this is a false statement for the reasons averred in the Affidavit-in-Reply filed by the Respondent No. 5.",,,

It is also noteworthy that as per the verification clause appended to the captioned application, the Applicant is not even personally aware of the",,,

veracity of the contents of paragraph 29 of the application. Thus, the Applicant is not even claiming to be personally aware that he has not been",,,

provided with the documents contained in Exhibit W.,,,

It is submitted that 45 of the 153 documents listed in Exhibit ‘W’ are facility documents between the financial creditors of the Corporate,,,

Debtor and companies of the Videocon Group. These documents form the basis of the claims submitted by the members of the COC of the Corporate,,,

Debtor, and therefore would certainly form part of the documents already available with the Applicant. Therefore, to this extent, the statement made",,,

by the Applicant in paragraph 29 of the application with respect to the entries in Exhibit W is false.,,,

It is submitted that 17 of the 153 documents listed in Exhibit ‘W’ are documents which are part of Miscellaneous Application No. 2385 of,,,

2019 in Company Petition (IB) No. 2 of 2018, a copy of which is in the possession of the Applicant as the Corporate Debtor was a party to those",,,

proceedings as well as the appeal that arose therefrom. In fact, page 69 of the Affidavit-in-Reply of the Respondent No. 5 (being part of the order",,,

dated 12th February, 2020, passed by this Hon’ble Tribunal) recorded that the Respondent No. 2 therein (which is the Corporate Debtor herein)",,,

had supported the reliefs being sought for in Miscellaneous Application No. 2385 of 2019. Thus, the Applicant cannot now state that he is unaware of",,,

the documents forming part of the record of Miscellaneous Application No. 2385 of 2019.,,,

Serial number 85 in Exhibit W also shows the dishonesty of the Applicant. The end of the description of the document in serial number 85 contains,,,

the line “[KCO Note: This document is in Portuguese]â€. This appears to be in internal note between the Applicant and his attorneys whereby it,,,

is noted that the document is in the Portuguese language. However, this also shows that the Applicant is already aware of this document and has a",,,

copy. In fact, the Applicant most certainly has a copy of this document as it is Exhibit 28 in the Miscellaneous Application No. 2385 of 2019, a copy of",,,

which is already in the possession of the Applicant.,,,

Thus, it is clear that the Applicant has made false statements on affidavit and has thus committed perjury. For this reason, the present Application",,,

ought to be dismissed with exemplary costs, and necessary action ought to be taken against the Applicant under section 425 of the Companies Act,",,,

2013.,,,

It is further contended that the Applicant has not filed any rejoinder denying the allegations set out in the Affidavit-in-Reply. Thus, the Applicant",,,

is deemed to have admitted the allegations that he has committed perjury and has made a false affidavit before this Hon’ble Tribunal.,,,

Judgments relied upon:,,,

i. ABCD v. Union of India: (2020) 2 SCC 52, more particularly paragraphs 14 to 19.",,,

ii. Prestige Lights Limited v. State Bank of India: (2007) 8 SCC 449, more particularly paragraph 14.",,,

The Respondent No. 5 has dealt with each and every entry in Exhibit W in his Affidavit-in-Reply dated 25th June 2020. The Respondent No. 5,,,

has also supplied a chart showing the categories into which the 153 documents set out in Exhibit W fall. A perusal of Exhibit W shows:,,,

i. There is significant overlap between entries â€" such as 21 different entries talk about financial documents of the Corporate Debtor, and 13 different",,,

entries all relate to organizational details.,,,

ii. 45 documents pertain to loan documents which the Applicant would have already been supplied with by the members of the COC.,,,

iii. 48 documents pertain to correspondence and transactions to which the Corporate Debtor is not a party.,,,

iv. 66 documents relate to the affairs of the subsidiaries of the Corporate Debtor.,,,

It is pertinent to note that after the Respondent No. 5 filed his Affidavit-in-Reply raising the above issues, the Applicant, through his attorneys,",,,

submitted an unaffirmed “Written Note†through which they sought to completely change their case and pivot away from Exhibit W. Through this,,,

“Written Noteâ€, the Applicant now sought information completely unrelated to Exhibit W and which had no basis in the pleadings of the captioned",,,

application. This also shows the non-application of mind of the Applicant, and for this reason also, the present application ought to be dismissed and",,,

exemplary costs ought to be imposed upon the Applicant.,,,

The Applicant has sought to portray a picture that the time period for the CIRP of the Corporate Debtor is running out, and therefore urgent reliefs",,,

are required from this Hon’ble Tribunal. The Applicant has used this justification to approach this Hon’ble Tribunal during the lockdown,,,

period.,,,

However, this is a false statement as the Applicant has conveniently overlooked the Insolvency and Bankruptcy Board of India (Insolvency",,,

Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020, which has added the following regulation after Regulation 40B in",,,

the CIRP Regulations:,,,

“40C. Special provision relating to time-line. Notwithstanding the time-lines contained in these regulations, but subject to the provisions",,,

in the Code, the period of lockdown imposed by the Central Government in the wake of COVID19 outbreak shall not be counted for the",,,

purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution",,,

process.â€​,,,

Thus, there is currently no apprehension of the CIRP process of the Corporate Debtor getting stalled and the urgency being displayed by the",,,

Applicant is false.,,,

It is also submitted that the advocate for the Respondents has not been able to obtain instructions or Vakalatnama from the remaining Respondent,,,

Nos. 1-4 and 6 due to the lockdown situation. The Advocate for the Respondent Nos. 1 & 5 sent an email communication to the remaining,,,

Respondent Nos. 1-4 and 6 asking for instructions to prepare an affidavit as per the order of this Hon’ble Tribunal dated the 26th of June 2020.,,,

The Respondent Nos. 1, 2 and 4 have responded stating that they are not in a position to make any affidavit in reply or give any particulars during this",,,

lockdown period.,,,

It can be seen that the current pandemic has instilled a deep-rooted fear of the Coronavirus amongst all members of society. It can also be noted,,,

that the Central and State Governments have not yet lifted the lockdown in light of the constantly increasing cases. In these circumstances, it is",,,

extremely distressing that the Applicant is seeking hearing and disposal of the present application in such haste. It may be noted that the Respondents,,,

have (in total) been given less than a week to file their affidavits in reply, which is insufficient considering that none of the Respondents are working",,,

from their homes and cannot make frequent trips to other places out of fear for their safety. It is submitted that the very purpose of not opening the,,,

courts and tribunals and conducting hearings through video conferencing.,,,

It is submitted that the Respondent No. 5 has already made a categorical statement as to what is available with him and what isn’t, by way of",,,

the interim Affidavit-in-Reply.,,,

It is emphasised that the Corporate Debtor had no separate existence of its own but was fully administered by its holding company. Thus, if the",,,

Applicant seeks any further documents or information, he ought to approach the Resolution Professional of the holding company, VIL, and not the",,,

Respondents.,,,

We have perused the records and duly considered the reasons, grounds submitted by the RP in respect of the present Application, having",,,

considered the facts and circumstances, the situation and the prayer sought by the Applicant, the Bench is satisfied with the submissions made by the",,,

Applicant on the prayers that Directors, Promoters and the persons associated with the management of the Corporate Debtor to extend full co-",,,

operation, provide necessary assistance and the information to the Applicant/Resolution Professional. The Respondents are bound under law to",,,

provide necessary information sought by the RP. No amount of explanation can absolve them of that liability. The submission/the plea taken by the,,,

Respondents that due to lockdown, pandemic situation, Advocate for the Respondent Nos. 1 to 4 & 6 is not able to obtain instructions or Vakalatnama",,,

etc. would not be a convincing ground in view that the State Government vide order dated 31st August, 2020 with Easing of Restrictions and Phase-",,,

wise opening of Lockdown (Mission Begin Again) permitted various activities with certain restrictions. Therefore, the above plea of the Respondents",,,

is not tenable.,,,

In fact the Respondent No. 5 has subsequently filed M.A No. 3944 of 2020 in C.P.(IB)-02/MB/2018 seeking consolidation of the CIRP of VOVL,,,

Limited, which is under consideration before the Hon’ble Tribunal. Further, the order dated 22 August 2019 in M.A No. 2385 of 2019 in C.P.(IB)-",,,

02/MB/ 2018 does not have the effect of staying the CIRP of the Corporate Debtor herein since it was passed prior to the commencement of CIRP,,,

of the CD. In any event, M.A No. 2385 of 2019 in C.P. (IB)-02/MB/2018 is a subject matter of Company Appeal (AT) (INS) 299 of 2020 and",,,

connected matters before the Hon’ble National Company Law Appellate Tribunal.,,,

Therefore, we are of the view that the present IA filed under section 19(2) read with section 60(5) of the IBC reliefs sought therein are within the",,,

four corners of IBC, in order that the CIRP can effectively completed in a time bound manner. Considering the aforesaid discussions, we are of the",,,

considered opinion that the Application needs to allowed. Hence ordered.,,,

ORDER,,,

The Application be and the same is allowed on contest. We hereby direct the Directors, Promoters and the persons associated with the management",,,

of the Corporate Debtor to forthwith extend full co- operation, provide all assistance and hand over all the information including Books of",,,

Accounts/Bank Accounts, provide the information and documents set out in Annexure-W to the present Application and all other relevant documents",,,

of the Corporate Debtor to the RP. We also direct that the Applicant may obtain such information and documents, as may be necessary from the",,,

persons associated with the management of the Corporate Debtor in addition to seeking the same from the Directors, Promoters of the Corporate",,,

Debtor as well as from the MCA website available in the public domain. Ordered accordingly. No costs.,,,

We would also like to emphasise that section 70 of the IBC provides for punishment for misconduct in course of CIRP. The Directors could be liable,,,

thereunder, in case of violation of any order.",,,