TMI Blog2020 (9) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Members of the Suspended Board of Directors of the Corporate Debtor and their Associates be directed to submit / hand over all the requisite books, financial debtor, returns and assets to the Resolution Professional immediately and also provide necessary assistance/cooperation in smooth conduct of Corporate Insolvency Resolution Process - The 1st Respondent / Resolution Professional in CA 3/2019 before the Adjudicating Authority had stated that the Corporate Debtor is a public limited company with its shares closely held within family members and that sufficient time was given to the members suspended Board of Directors of the Corporate Debtor to provide all necessary Books, Financial Data, Information and Returns. However, they had failed to comply with the directions given by the 1st Respondent / Interim Resolution Professional in this regard and hence the said application was filed. I B Code - HELD THAT:- It cannot be lost sight of that where any personnel of the Corporate Debtor does not render assistance or cooperation to the Interim Resolution Professional , the National Company Law Tribunal / Adjudicating Authority on the application proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees, directors, mangers, key managerial personnel etc., if any of the Corporate Debtor and this is meant to render assistance to the Interim Resolution Professional in carrying out his duties in an effective and efficacious manner. This Tribunal, on going through the Impugned Order dated 23.03.2020 passed by the Adjudicating Authority in CA No. 3/2019 in CP (IB) No. 70/Chd/Hry/2018 comes to a resultant conclusion that the Adjudicating Authority in Law, is well within its ambit to make a recommendation for considering the aspect of commencement of proceedings and not a recommendation for initiation of criminal proceedings and in this regard it is for the Insolvency Bankruptcy Board of India to take a final call, of course, after applying its independent overall assessment in an objective and dispassionate manner and to act accordingly, in the subject matter in issue - the Adjudicating Authority while passing the impugned order had not exceeded its jurisdiction. The impugned order passed by the Adjudicating Authority does not suffer from any patent illegality in the eye of Law - Appeal dismissed. - Company Appeal (AT) (Insolvency) No. 571 of 2020 Company App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the commencement of CIRP on 30.10.2018 can only be said to be self-serving evidence and the later proceedings by the police and their report is not brought on record. 14. The plea of respondents No. 4 and 5 is that they were merely sleeping directors. The plea is not proved by any evidence. Moreover, the extension of co-operation u/s 19 of the code is restricted to only managing directors/executive directors. The plea raised cannot be accepted. 15. We are therefore, of the prima facie view that the respondents are No. 1 to 5 have not delivered to the RP all books and papers in their control or custody and belonging to Mahabir Techno and which they were required to deliver. 16. The Registry is directed to send a copy of this order to the board for consideration for initiation of prosecution u/s 70 r/w 236 of the Code and consequently disposed of the CA No. 3/2019. Appellants contentions in Comp. App. (AT) (Ins.) No. 571/2020 3. The Learned Counsel for the Appellants submits that the Adjudicating Authority (NCLT, Chandigarh) while passing the impugned order dated 23.03.2020 had not considered the circular dated 02.03.2020 issued by the Government of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plea of the Appellants that the mitigating factors for the independent and non- executive directors have been designed to protect and prevent them from being held liable for the acts of the company which are beyond their control or not within their mandate, in their capacity as outside directors who are not involved in the day to day affairs of the company. That apart, since the Appellants status as Independent Directors was not considered by the Adjudicating Authority , the impugned order is an erroneous one. 7. Yet another submission made on behalf of the Appellants is that the first Respondent neither made any allegations against the Appellants nor any finding was rendered by the Adjudicating Authority . In reality, the Adjudicating Authority had failed to apply judicial mind to consider the contention projected by the Appellants. 8. The Learned Counsel for the Appellants emphatically takes a stand that after the Notice was received by the present Appellant, in the first Reply filed by them along with other directors on 04.11.2019, it was mentioned that the Appellants are Sleeping Directors and have no role to play in the day to day affairs, management and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 785. 12. The Learned Counsel for the Appellants points out that in the absence of specific powers given under the statue, the Adjudicating Authority committed a patent error in presuming the Jurisdiction and referring the matter to the Central Govt./IBBI for initiating action against the Appellants. Further, it is the case of the Appellants that the I B Code is silent on the jurisdiction of the Adjudicating Authority to pass any order for recommending the matter to the Insolvency and Bankruptcy Code for conserving the issue of action under Section 70 read with Section 236 of the Code. 13. The Learned Counsel for the Appellants submits that the Appellants stand is that the Books of Accounts were lying in the Administrative Office of the Corporate Debtor situated in the factory premises when the factory was taken over by the Union Bank of India on 05.10.2018 is supported by the fact that ex-directors of the company were required to sign in blank Panchanama which was prepared by the Authorised Officer and that the directors of the company , who were called at the site were asked to sign on the blank Panchanama and thereafter, they were not allowed to participa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants takes a stand that the Adjudicating Authority had committed a patent error by not taking into account the separate replies dated 04.11.2019, and the reply dated 24.02.2020 filed by the Appellants and the non-consideration of the reply of the Appellants is a grave error on the part of the Adjudicating Authority and in fact the Adjudication Process was farce exercise. In short though all the Appellants had not committed any offence as all the documents as available with them were provided to the Resolution Professional . And that the Appellants No. 2 3 are not at all liable for any action on another ground that in the reply dated 04.11.2019, it was mentioned that Sh. O.P. Khurana who Chairman-cum-Managing Director of the company was running the affairs solely and the remaining Suspended Directors are Sleeping Directors have no role to play in day to day affairs, management and conduct of the company hence, the impugned order forming an opinion against all the Appellants is an unjustified one. 19. The 1st Respondent had made general averments in the application projected before the Adjudicating Authority in regard to the non-cooperation by members of ex-b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the continued reluctance and failure of the Suspended Directors in furnishing the information, the first Respondent filed CA. No. 3/2019 before the Adjudicating Authority under Section 19 (2) read with Section 60 (5) of the I B Code, wherein a relief was sought for against the Suspended Directors for furnishing the requisite information and records. 24. The Adjudicating Authority on 04.10.2019 in CA. No. 3/2019 among other things had passed an order by making an observation that the respondent Nos. 1 to 5 were misconducting themselves in the course of Corporate Insolvency Resolution Process by not extending their Corporation and Assistance to the Resolution and were withholding and not disclosing the information supposed to be furnished by them and not furnishing the books and documents belonging to the Corporate Debtor which were supposed to be maintained by them at the relevant point of time. 25. Even while admitting the CP(IB) No. 70/Chd/Hry/2018, the Adjudicating Authority to provide a last opportunity to the Respondents therein, had directed the Resolution Professional to issue a fresh notice immediately to the Respondents specifically indicating w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o as well as Advocate of District Court, Kurukshetra and endorsed and accepted by Sh. O.P. Khurana and Sh. Rakesh Khurana (Directors of the Corporate Debtor ). In fact the Panchanama shows that at the time of possession, there was no machinery and any other inventory found in the factory premise and the premise was totally empty and this points out that the defense of the documents being locked in the premises is Sham and an afterthought the resorted to by the Appellants to justify its non -compliance with the CIRP Process as well as the directions of the Adjudicating Authority . 29. In regard to the lodging of NCR for the loss of Laptop is nothing but self- serving evidence, created as an afterthought, in as much as the said complaint was made more than forty days after the date of alleged loss of Laptop and after the commencement of the CIRP . Further, as per report filed with local police, the Laptop was allegedly lost on 03.10.2018, whereas, the possession was taken over by the Union Bank of India on 05.10.2018, on which date as per the Appellants version, the Bank suddenly appeared with police, without any prior intimation. Hence, the question of the Lapto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Adjudicating Authority had stated that the Corporate Debtor is a public limited company with its shares closely held within family members and that sufficient time was given to the members suspended Board of Directors of the Corporate Debtor to provide all necessary Books, Financial Data, Information and Returns. However, they had failed to comply with the directions given by the 1st Respondent / Interim Resolution Professional in this regard and hence the said application was filed. I B Code 36. It is to be pointed out that Section 19 of the I B Code imposes an obligation on the personnel and promoters of the Corporate Debtor to extend all assistance and cooperation with the Interim Resolution Professional may require the management of the affairs of the Corporate Debtor , Personnel refers to directors, managers, key managerial personnel, designated partners and employees, if any of the Corporate Debtor by means of Section 5(23) of the Code. The burden of establishing a case is on the office holder and is required to satisfy the Authority concerned that the information he seeks is reasonably required. 37. It cannot be lost sight of that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of Law is available to the Independent Directors only under the Companies Act, 2013. The Independent Directors are part of Board of Directors and have similar duties and responsibilities as other directors. It is to be remembered that a Company may even constitute different committees for an efficient conduct of its affairs and the said Committee is to carry out those functions and report its decisions. Indeed, some Committees have important statutory functions and must include Independent Directors as per Law. Also, that, Independent Directors are an integral part of the Board and, therefore, their duties and functions should be read in conjunction with statutory provision mentioned in Section 166 of the Companies Act, 2013 which speaks of Duties of Directors and not in isolation. 42. In the instant case on hand, it cannot be said that the Appellant(s) (in both the Appeals) were not provided with the opportunities relating to furnishing of information in respect of books and assets, financial data, returns etc. to the Resolution Professional . To put it succinctly, on 12.10.2019 a notice was issued by the 1st Respondent / Resolution Professional to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India, Ministry of Corporate Affairs through general circular 1/2020 dated 02.03.2020 can be taken advantage of by the Independent Directors only under the Companies Act, 2013, as per Section 149(12)(ii) of the Act because of the reason that under most of the other Laws applicable in our country, the Directors are at the first instance deemed to be aware of the offence committed by the Company and resultantly held liable for default, as opined by this Tribunal. 46. A mere running of the eye of the ingredients of Section 19 of the Code latently and patently imposes an obligation on the personnel and promoters of the Corporate Debtor to extend all assistance and cooperation which the Interim Resolution Professional will require in running / managing the affairs of the CD. In fact, the term personnel is defined to mean the employees, directors, mangers, key managerial personnel etc., if any of the Corporate Debtor and this is meant to render assistance to the Interim Resolution Professional in carrying out his duties in an effective and efficacious manner. 47. Dealing with the aspect of R4 and R5 (Appellants No. 1 and 2) in Company Appeal (AT) (Insolvency) No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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