Ritika Arora vs Rakesh Kumar Jain & Ors

Avneesh Kumar Singh & Anr. ...Appellants

Versus

Rakesh Kumar Jain, RP of SN Jee Buildwell Pvt. Ltd. ...Respondents & Ors.

Present: For Appellant: Mr. Abhijeet Sinha, Mr. Prateek Gupta, Mr. Nikhil Saini, Advocates For Respondent: Mr. Mohit Nandwani, Advocate for R-2 Mr. Akshat Bajpai, Advocate for RP

With Company Appeal (AT) (Insolvency) No. 05 of 2022

IN THE MATTER OF:

Ritika Arora ...Appellants

Versus

Rakesh Kumar Jain, RP of SN Jee Buildwell Pvt. Ltd. ...Respondents & Ors.

Present: For Appellant: Mr. Mohit Nandwani, Advocate For Respondent: Mr. Abhijeet Sinha, Mr. Prateek Gupta, Mr. Nikhil Saini, Advocates Advocate for R-2 & 3 Mr. Akshat Bajpai, Advocate for RP

ORDER

17.11.2022: These two Appeals have been filed against the Order dated

22.10.2021 passed by National Company Law Tribunal, New Delhi, Court-V

wherein the direction has been issued by the Adjudicating Authority to -2-

institute a prosecution against the Respondents (Appellants before us)

particularly under Section 70 of IBC, 2016.

2. The Appellants before us have been the ex-directors of the Corporate

Debtor. An Application being I.A./1089/2021 was filed by the Resolution

Professional under Section 19(2) of the Code. On which Application, the Order

impugned has been passed. The Last paragraph of the Order is as follows:

"So, considering this, since the documents referred to at Sr. No. 27 has/have not been handed over as yet. So, under such circumstances we have no option but to direct the RP to proceed under Chapter VII of IBC, 2016 and institute a prosecution against the respondents, particularly under Section 70 of IBC, 2016 or in accordance with the provisions of law.

With this, the present application i.e. IA/1089/2021 stands disposed off."

3. Learned Counsel for the Appellant submits that the Application filed

by the RP only being under Section 19(2) and Appellants having been fully

cooperating with the RP and documents as asked for by the RP, were all

provided except document mentioned at Sr. No. 27, which itself indicates that

cooperation was fully made by the Ex-Directors. It is submitted that document

at Sr. No. 27 was not possessed by either of the Appellants hence the same

could not be produced.

Company Appeal (AT) (Insolvency) No. 54 & 05/2022 -3-

4. Learned Counsel for the Resolution Professional has also fairly

submitted that he had filed the Application under Section 19(2) on which

Order was passed. In the Reply, which has been filed by the RP in Company

Appeal (AT) Ins. No. 54 of 2022, following has been stated in paragraph 3:

"3. That, the Respondent No. 1 filed an Application beforethe Hon'ble NCLT on 22.02.2021 under Section 19(2) of the Code being I.A. No. 1089 of 2021 against Members of suspended board seeking directions for non-cooperation as some of the Documents mentioned were not provided and contained discrepancy."

5. It is true that the Adjudicating Authority while considering the

proceedings under IBC has full jurisdiction to make a reference to the Board

or the Central Government to file a complaint for initiating any prosecution.

In the present case, there was no Application or Request made by RP or any

party to initiate any prosecution. Section 70 under which Prosecution has

been directed to initiate, provides for as follows:

"Section 70: Punishment for misconduct in course of corporate insolvency resolution process.- (1) On or after the insolvency commencement date, where an officer of the corporate debtor--

(a) does not disclose to the resolution professional all the details of property of the corporate debtor, and details of transactions thereof, or any such other

Company Appeal (AT) (Insolvency) No. 54 & 05/2022 -4-

information as the resolution professional may require;

or

(b) does not deliver to the resolution professional all or part of the property of the corporate debtor in his control or custody and which he is required to deliver; or

(c) does not deliver to the resolution professional all books and papers in his control or custody belonging to the corporate debtor and which he is required to deliver; or

(d) fails to inform there solution professional the information in his knowledge that a debt has been falsely proved by any person during the corporate insolvency resolution process; or

(e) prevents the production of any book or paper affecting or relating to the property or affairs of the corporate debtor; or

(f) accounts for any part of the property of the corporate debtor by fictitious losses or expenses, or if he has so attempted at any meeting of the creditors of the corporate debtor within the twelve months immediately preceding the insolvency commencement date,

he shall be punishable with imprisonment for a term which shall not be less than three years, but which may extend to five years, or with fine, which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both:

Company Appeal (AT) (Insolvency) No. 54 & 05/2022 -5-

Provided that nothing in this section shall render a person liable to any punishment under this section if he proves that he had no intent to do so in relation to the state of affairs of the corporate debtor.

(2) If an insolvency professional deliberately contravenes the provisions of this Part the shall be punishable with imprisonment for a term which may extend to six months, or with fine which shall not be less than one lakh rupees, but may extend to five lakhs rupees, or with both."

6. Section 70(1)(c) provides that when Corporate Debtor does not deliver

to the resolution professional all books and papers in his control or custody

belonging to the corporate debtor and which he is required to deliver, he shall

be punishable with imprisonment for a term which shall not be less than three

years. Essential fact to be found is "the papers and books in his control or

custody". There has to be prima facie satisfaction that papers which have been

sought for, are in his control or custody which is not being given by the

Corporate Debtor, which may lead to a reference for institution of prosecution.

From the facts, which has been brought on record, it is clear that total thirty-

seven documents were asked for by the RP, which all were provided except Sr.

No. 27. There is also no finding that this document at Sr. No. 27 is in the

possession of either of the Appellants. We have already dealt with same issue

in a recent Judgement of this Tribunal in Company Appeal (AT) Ins. No. 169

of 2022 on which Learned Counsel for the Appellants has placed reliance.

Company Appeal (AT) (Insolvency) No. 54 & 05/2022 -6-

7. We thus are of the view that Direction for initiating prosecution was

uncalled for. We thus are satisfied that direction in the Order dated

22.10.2021 directing for instituting prosecution deserved to be set aside and

is hereby set aside.

Both the Appeals are allowed, accordingly to the above extent.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Mr. Barun Mitra] Member (Technical)

Basant/nn

Company Appeal (AT) (Insolvency) No. 54 & 05/2022