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January 9, 2019
All Articles by: Mr.áM. GOVINDARAJAN       View Profile
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Protection of action taken in good faith

Section 233 of the Insolvency and Bankruptcy Code, 2016 (‘Code’ for short) provides protection to-

  • the Government; or
  • any officer of the Government; or
  • member or officer of the Board; or
  • an insolvency professional; or
  • liquidator

from the legal suit or other legal proceedings for anything done which is in done or intended to be done in good faith under this Code or the rules or regulations made there under.

Insolvency professional

The insolvency professional plays a vital role in the corporate insolvency resolution process.  A whole array of statutory and legal duties and powers is vested on him.
The Code requires him to make every effort to protect and preserve the value of the property of the corporate debtor and manage its operations as a going concern.  He is a driving force and the nerve-centre in an insolvency proceeding of a corporate debtor.                  

Assistance to insolvency professional

Section 19 of the Code provides that the personnel of the corporate debtor, its promoters or any other person associated with the management of the corporate debtor shall extend all assistance and cooperation to the interim resolution professional as may be required by him in managing the affairs of the corporate debtor.

Where any personnel of the corporate debtor, its promoter or any other person required assisting or cooperating with the interim resolution professional does not assist or cooperate, the interim resolution professional may make an application to the Adjudicating Authority for necessary directions.

The Adjudicating Authority, on receiving an application from the interim resolution professional, shall by an order, direct such personnel or other person to comply with the instructions of the resolution professional and to cooperate with him in collection of information and management of the corporate debtor.

Protection to insolvency professional

The insolvency professional may act as-

  • interim resolution professional; or
  • resolution professional; or
  • liquidator

The insolvency professionals, in the course of corporate insolvency resolution process witness direct threatening from the corporate debtor.  Once the Adjudicating Authority appoints him as interim resolution professional, he is to take over the management of the corporate debtor.  Hindrances are there in taking over the management.  In such cases the interim resolution professional is to approach the Adjudicating Authority for giving protection to him.  He has protection for actions taken in good faith.  There is bar on trial of offences against an insolvency professional except on a complaint filed by the Board.

In ‘Punjab National Bank v. Divyajyothi Sponge Iron Private Limited’ – 2017 (12) TMI 1651 - NATIONAL COMPANY LAW TRIBUNAL, KOLKATA the resolution professional sought necessary assistance and security to him to visit the factory premises of the corporate debtor to carry out statutory duties and obligations peacefully.  The Adjudicating Authority, keeping in view of the direct threatening by the corporate debtor ordered that the copy of the order of the Adjudicating Authority might be served on the Director General of Police, West Bengal, Superintendent of Police, Bankura and in charge of Mejia Police Station for making proper and effective assistance to the resolution professional in valuation of the company.   In discharge of his duty any interference in the work of the resolution professional, action shall be initiated against the corporate debtor and it will be presumed that the corporate debtor is not obeying the order of the court.  It is expected that the corporate debtor should fully co-operate with the resolution professional.

In ‘The Central Bank of India and the State Bank of India v. Ashok Magnetics Limited’ – CP/551(IB)/CB/2017,  the interim resolution professional made efforts to take charge of the assets of the corporate debtor but there was stout resistance from the corporate debtor.  Therefore, the interim resolution professional filed an application before the Adjudicating authority praying for police assistance to discharge his functions as interim resolution professional.  The Adjudicating Authority directed the Superintendent of Police, Chennai in whose jurisdiction the registered office of the corporate debtor is situated where the corporate office of the corporate debtor is situated and Superintendent of Police, Puducherry where the factory of the corporate debtor is situated to give proper police assistance and personal security to the interim resolution professional so that he can take charge of the assets of the corporate debtor and perform the functions as per the provisions of the Code.  The Adjudicating Authority further directed the Director of the Corporate debtor to furnish the books of accounts, list of assets, list of financial and operational creditors, list of documents and other relevant particulars as envisaged in the Code and extend to all co-operation to the interim resolution professional.

In Punjab National Bank v. Mintri Tea Company Private Limited’ – 2018 (1) TMI 1417 - NATIONAL COMPANY LAW TRIBUNAL, KOLKATA, the resolution professional sought direction of the Adjudicating Authority for police protection.  The Adjudicating Authority directed the Superintendent of police to give police protection so that the resolution professional may discharge his duties and take over the management.  It also directed the corporate debtor to fully cooperate with the resolution professional, failing which action will be initiated against the corporate debtor under 70 of the Code.

In ‘Alchemist Asset Reconstruction Co. Limited v. Hotel Gaudavan (P) Limited’- CP/CA.No. (IB)-23 (PB)/2017  the interim resolution professional prayed the Adjudicating Authority for protection for all acts done by him in good faith and to save him from the frivolous allegations made in a FIR.  The Adjudicating Authority held that if, there is any complaint against the insolvency professional then the Board is competent to constitute a disciplinary committee and have the same investigated from an Investigating Authority as per the provisions of section 220 of the Code.   If after investigation the Board finds a criminal case has been made out against him then the Board has to file a complaint in respect of the offences committed by him.  Therefore a complaint by a former Director of the company with the police station would not be maintainable and competent as the complaint is not filed by the Board.

It is with the aforesaid object that protection to action taken by the interim resolution professional in good faith has been accorded by section 233 of the Code.  There is also complete bar of trial of offences in the absence of filing of a complaint by the Board.   

In Sunrise 14 A/S Denmark v. Muskaan Power Infrastructure Limited’- 2017 (10) TMI 1406 - NATIONAL COMPANY LAW TRIBUNAL, CHANDIGARH the resolution professional prayed for a director under section 19 of the Code, since the respondents did not comply with the directions of resolution professional and refused to accept the notice.  The Adjudicating Authority issued bailable warrants to secure their presence.  The Adjudicating Authority further directed the resolution professional to collect the bailable warrants from the registry and deliver to Commissioner of Police, Ludhiana to get the same executed. 

In ‘Takkshill Enterprises v. IAP Company Private Limited’ – 2019 (1) TMI 330 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI, a complaint filed by the interim resolution professional was not taken cognizance.  The Adjudicating authority directed the Deputy Commissioner of Police to issue instructions to Station House Officer of Police Station of Palam Vihat, Gurgaon to take cognizance of the complaint filed by the interim resolution professional.  The Adjudicating Authority observed that the interim resolution professional has to perform onerous statutory functions under the Code.  In cases the complaint discloses commission of a cognizable offence the Incharge Police Station is under legal obligation to take cognizance of the complaint as is mandated by section 190 of Criminal Procedure Code 1973.


By: Mr.áM. GOVINDARAJAN - January 9, 2019



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