Venugopal Dhoot vs Pravin Navandar

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal(AT)(Insolvency) No. 173 of 2021 IN THE MATTER OF: 1. Mr. Venugopal Dhoot Individual Indian Inhabitant, 171 C-wing, Mittal Court, 16th Floor, Maker Chambers, Nariman Point, Mumbai, Maharashtra - 400 021 ...Appellant No.1

2.Mr. Deepak Anant Pednekar, Suspended Director - VOVL Ltd Rashmi Agency 2, 3 wing, Flat No. 403 4th Floor New Link road, Vasai Link Road, Nalasopara (East) Thane - 401 209 ...Appellant No.2

Vs 1.Mr. Pravin R. Navandar Resolution Professional - VOVL LTD D 519/520, Neelkanth business park, Old Nathani Road, Vidyavihar (W), Mumbai, Maharashtra - 400 086 ...Respondent No.1

2.Keserlal Nensukhlal Gandhi Suspended Director - VOVL Ltd Bk Complex, Dhangar Galli Anandi Bajar, Ahmednagar, Maharashtra - 414 001 ...Respondent No.2

3.Sarita Sanjay Surve, Suspended Director - VOVL Ltd Videocon Apartment, Pratapnagar, Osmanpura, Flat No.10 Jalachrya Bhikshu, B-wing, Kranti Chowk Aurangabad - 431 005 ...Respondent No.3

4.U.S Kadam Kadam & Co. Chartered Accountants, Statutory Auditors - VOVL Ltd 8/9 Viraj Estate, OPP. Tarakpur Bus Stand, Ahmednagar - 414003 ...Respondent No.4

5.Pradipkumar Nandlal Dhoot 171-C Wing, Mittal Court 16th floor, Makers Chambers Nariman Point, Mumbai - 400 021 ...Respondent No.5

Company Appeal (AT) (Ins) No. 173 of 2021 1 Present: For Appellants: Mr. Amir Arsiwala, Advocates For Respondents: Mr. Shyam Kapadia, Mr. Vishnu Shriram, Mr. Aditya V Singh, Mr. Ashwij Ramaiah, Advocates for Respondent No. 1 Mr. Kesarlal Gandhi, Advocate for Respondent No. 2 Ms. Sarita Surve, Respondent No. 3 in person Mr. US Kadam, Respondent No. 4 in person Mr. Pradipkumar N. Dhoot, Respondent No. 5 in person

JUDGMENT

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The present appeal is filed under Section 61 of the 'Insolvency and

Bankruptcy Code, 2016' (in short 'Code') against the order dated 15th

December, 2020 passed by the Adjudicating Authority (National Company

Law Tribunal), Mumbai Special Bench, Court No.II, in IA/1018/ 2020 in

CP(IB) No. 2742/2019.

2. The Adjudicating Authority has directed the Promoters, Directors and

the persons associated with the management of Corporate Debtor - 'VOVL

Limited' to extend full cooperation and handover all the Books of Accounts/

Bank Accounts etc., to the Resolution Professional of the Corporate Debtor. It

has also been directed to the Resolution Professional to seek the information

from the MCA website available in the public domain. The impugned order

has also stated that in case of violation of this order under Section 70 of the

Code provides for punishment for misconduct in course of 'Corporate

Insolvency Resolution Process' (CIRP). In the observation, it has also been

Company Appeal (AT) (Ins) No. 173 of 2021 2 observed that the Resolution Professional has insisted for urgent relief during

the lockdown period and the Adjudicating Authority has stated in para 45 of

the impugned order that the statement of the Resolution Professional is not

correct and IBBI (Insolvency Resolution Process for Corporate Person) (3rd

Amendment) Regulation 2020 vide Regulation 40C has already covered such

eventuality. In para 48 of the impugned order, the Adjudicating Authority has

also stated the Resolution Professional is seeking hearing and disposal of the

present application in such haste and has also observed that Respondents

were given less than a week to file their affidavits in reply which is insufficient

while working from homes and cannot make frequent trips to other places out

of fear for their safety.

3. The Appellants have prayed for the following reliefs:

I. To set aside the order dated 15.12.2020 passed in IA/1018/ 2020

in CP(IB) No. 2742/2019.

II. For costs and for such further and other reliefs etc.

4. The Appellants have also filed two 'Interlocutory Application' (IA) No.

397 of 2021 for exemption from filing certified copy of impugned order and IA

No. 296 of 2021 for stay.

5. The Appeal was heard on various dates i.e. 09.03.2021 15.03.2021,

07.04.2021, 03.06.2021, 10.06.2021 and 22.06.2021.

6. The 'Corporate Debtor' (CD) is a company by the name of 'VOVL Ltd' for

which the Respondent No.1 is the Resolution Professional (RP). CD is a wholly

owned subsidiary of 'Videocon Industries Limited' (VIL). Both CD and its

Company Appeal (AT) (Ins) No. 173 of 2021 3 holding company VIL are undergoing CIRP at the relevant time. It was

submitted that CIRP of CD was initiated on 08.11.2019 and on 20.01.2020,

Respondent No.1 was appointed as RP. The Appellants have submitted that

they were providing documents in their possession even upto 18.03.2020 and

from 23.03.2020 Covid-19 pandemic led to a nation wise lockdown. Around

15.06.2020, the Appellants were served with the copy of the above stated IAs

and on 22. 06.2020 listed for hearing for the first time, before the Adjudicating

Authority and on the request of the appellant only 3 days' time was allowed

to file their counter affidavit. On 25.06.2020, the Appellants have filed their

reply. It was conveyed by the counsel of the Appellant that on the date of

hearing on 26.06.2020, the RP gave a different written note for the list of

document what was earlier asked for. The RP also came up with a completely

different case for funding requirement of the CD. The Appellants submitted

on 26.06.2020 that whatever documents in their possession have already

handed over to the RP and no other documents with them. The Appellants

have also submitted that they have repeated pointed out to the RP that the

CD was only a 'SPV' which have no staffs of its own but was completely

managed by its holding company 'VIL' and requested RP to get it touch with

the RP of 'VIL' to obtain additional information. It was also submitted that RP

is seeking documents pertaining to the subsidiary of CD and the same is not

permitted as per explanation to Section 18(1) of the Code and hence this is

outside scope of Section18 & 19 of the Code. The Appellants have raised the

issue of harassment by RP. The disposal of the Petition by the Adjudicating

Authority was in haste and as a result such order has been passed by the

Company Appeal (AT) (Ins) No. 173 of 2021 4 Adjudicating Authority. The Appellants have also stated that threatening to

invoke Section 70 of the Code is not correct as the same is a criminal offence

and the Adjudicating Authority is barred by virtue of Section 236 of the Code.

7. The Respondent No. 1- RP has submitted that the CD was participating

in Oil and Gas blocks (Assets) in the Brazil through its overseas subsidiary.

The Brazil business of the CD was done through an entity incorporated in

Brazil and a step down subsidiary of CD through Videocon Hydrocarbon

holdings limited, a wholly owned subsidiary of the Corporate Debtor

incorporated in the CAYMAN Islands, total financial, debt involved is Rs.

30,654 Crores. The RP has stated that originally they asked for some lists as

per Exhibit -W and later on has submitted revised list of documents and

information required in term of the Adjudicating Authority order dated

26.06.2020. The RP has also accepted the fact that they are asking for the

documents of the subsidiary to link up the transactions. He has also stated

that Section 19 and 20 of the Code has appropriate provision to ask for such

documents from erstwhile Promoters, Directors etc. The R1 has insisted for

the documents of the foreign subsidiaries. He also insisted that the

documents are required to examine if the CD has entered into avoidance

transactions in terms of section 43, 45, 49 and 66 of the Code apart from

closing of books of accounts and statutory compliances and finalisation of

Information memorandum.

8. This Appellate Tribunal was repeatedly asking the parties the

requirement of various documents and sources from where the documents

can be obtained. Based on these observations on 10.06.2021 both the parties

Company Appeal (AT) (Ins) No. 173 of 2021 5 agreed the suggestions for a list of requisite documents and from where the

documents can be obtained by the RP

9. There are 21 list of statements/contact details / books of account/

bank statements etc., has been asked by Resolution Professional. The same

is at reproduced hereunder:

Company Appeal (AT) (Ins) No. 173 of 2021 6 Company Appeal (AT) (Ins) No. 173 of 2021 7 Against which the Appellants have provided the following details:

Company Appeal (AT) (Ins) No. 173 of 2021 8 Company Appeal (AT) (Ins) No. 173 of 2021 9 Company Appeal (AT) (Ins) No. 173 of 2021 10 Company Appeal (AT) (Ins) No. 173 of 2021 11 Company Appeal (AT) (Ins) No. 173 of 2021 12 Company Appeal (AT) (Ins) No. 173 of 2021 13 Company Appeal (AT) (Ins) No. 173 of 2021 14 Company Appeal (AT) (Ins) No. 173 of 2021 15 Company Appeal (AT) (Ins) No. 173 of 2021 16 Company Appeal (AT) (Ins) No. 173 of 2021 17 Company Appeal (AT) (Ins) No. 173 of 2021 18

10. The sum and substance of both the submissions of Appellant and

Respondents reveals that the Financial Statement of the CD is available with

RP. What he is seeking is the details of the assets of the subsidiaries which is

governed by the explanation to Section 18 of the Code and the same is stated

as below:

"Section 18- Duties of interim resolution professional. -The interim resolution professional shall perform the following duties, namely: -

(a) collect all information relating to the assets, finances and operations of the corporate debtor for determining the financial position of the corporate debtor, including information relating to

-

(i) business operations for the previous two years;

(ii) financial and operational payments for the previous two years;

(iii) list of assets and liabilities as on the initiation date;

and

(iv) such other matters as may be specified;

(b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15;

(c) constitute a committee of creditors;

(d) monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors;

(e) file information collected with the information utility, if necessary; and

Company Appeal (AT) (Ins) No. 173 of 2021 19

(f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including -

(i) assets over which the corporate debtor has ownership rights which may be located in a foreign country;

(ii) assets that may or may not be in possession of the corporate debtor;

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies;

(vi) assets subject to the determination of ownership by a court or authority;

(g) to perform such other duties as may be specified by the Board.

Explanation. - For the purposes of this 1 [section], the term "assets" shall not include the following, namely: -

(a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment;

(b) assets of any Indian or foreign subsidiary of the corporate debtor; and

(c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator."

Company Appeal (AT) (Ins) No. 173 of 2021 20

11. The most important thing is the tally data of the CD which has to be

obtained from Resolution Professional of VIL i.e. its holdings Company of CD.

The bank accounts details for the last five years can be obtained by the

Respondent No.1 from the Bank which are under his control at the moment

and details of the Directors can be obtained from the MCA website. It would

not be out of point to mention here that parties have provided various

citations which are not of relevance to the facts of this case.

12. On a specific query by the Bench, why RP for more than one year could

not get the books reconstructed with the assistance of expert IT Professional

from outside to ascertain avoidable transactions of the Code, if he suspects

something based on inputs available with him. The bench could not get a

clarity on the issue. What we find basically that a culture has come were

Accounts people wants to do the job of Auditor, Auditor wants to do the job of

Vigilance and Vigilance wants to do the job of CBI. The RP being a competent

professional and bankers within his charge, he should have reconstructed a

book showing cash flow for the specified period as per the Code and by this

time could have detected that whether any preliminary finding is for avoidance

transactions and then the other party could have proved either way by this

time. The RP can take the assistance of concerned Registrar of Company /

MCA website and could have obtained financial statements /annual return

and his apprehension could have been proved either way. We cannot enter

into a domain where Section 18 vide its explanation the term, assets, shall

not include asset of any Indian or foreign subsidiary of the CD. It is also

unfortunate to observe that the CD should have been under group insolvency

Company Appeal (AT) (Ins) No. 173 of 2021 21 the law yet to be formed on 'group insolvency' or should have common

Resolution Professional but there is no specific provision to force this action.

Hence, we are unable to confirm that Appellants are fully responsible for non-

availability of the documents with whatever data what has been provided to

us. Hence, we are unable to sustain the Adjudicating Authority order at this

juncture which has been passed in haste.

13. Accordingly, we are setting aside the impugned order dated 15th

December, 2020 passed in IA/1018/2020 in CP(IB) No. 2742/2019 and

remanding back to the Adjudicating Authority to decide the application afresh

in the light of aforesaid observations. Pending IAs, if any, stands disposed off.

No order as to costs.

[Justice Jarat Kumar Jain] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member(Technical)

5th July, 2021 New Delhi

Raushan.k

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