Application U/S 19(2) Of IBC Is Not Maintainable Against Third Party: NCLT Delhi
The National Company Law Tribunal (NCLT), Chandigarh bench of Shri Bachu Venkat Balaram Das (Judicial Member) and Shri Atul Chaturvedi(Technical Member), has held that an application under section 19(2) of the Insolvency & Bankruptcy Code, 2016 (“Code”), filed by the Resolution Professional (“RP”) to collect information for effective conduct of Corporate Insolvency...
The National Company Law Tribunal (NCLT), Chandigarh bench of Shri Bachu Venkat Balaram Das (Judicial Member) and Shri Atul Chaturvedi(Technical Member), has held that an application under section 19(2) of the Insolvency & Bankruptcy Code, 2016 (“Code”), filed by the Resolution Professional (“RP”) to collect information for effective conduct of Corporate Insolvency Resolution Process (“CIRP”) is not maintainable against third party to the proceedings.
As per Section 19(2) of the Insolvency and Bankruptcy Code (IBC) the Resolution Professional (RP) is empowered to apply to the Adjudicating Authority (AA) for directions if personnel of the corporate debtor, its promoters, or others required to assist the RP fail to co-operate.
Brief Facts:
M/s. Andes Town Planners Private Limited (“Corporate Debtor”) went to CIRP on 02.03.2023 and Mr. Ashok Kumar Gupta was appointed as Interim Resolution Professional (“IRP”).
As per the Code, the Primary duties of an IRP involve managing the corporate debtor, taking control of assets, verifying claims, and facilitating the Corporate Insolvency Resolution Process (CIRP)”.
The Corporate Debtor and the M/s Highness Infra Developers Private Limited (“Respondent”) executed a Memorandum of Understanding (MOU) for development of residential-cum-commercial complex on one of the properties of the Corporate Debtor.
The IRP filed the present application against the Respondent under section 19(2) of the Code, seeking appropriate directions to “ hand over all the required details/records/ documents/information with respect to the MOU entered between the Corporate Debtor as the same was necessary information for facilitating the CIRP of the Corporate Debtor.
Contentions:
The Respondent contended that as per the MOU, the Respondent had to complete the construction of the property which was done by the Respondent on time and the units of the complex were divided in between the Respondent and the Corporate Debtor as per the MOU.
Substantial number of the units in possession of the Respondent were already sold by him before the initiation of insolvency proceedings against the Corporate Debtor. Further, the Corporate Debtor had also sold its share of units in the complex to third parties much prior to initiation of the insolvency proceedings.
As the Corporate Debtor had also sold its share to a third party, the Complex no longer remains the asset of the Corporate Debtor and any information in regard to the same is not relevant.
The Application of the IRP cannot be proceeded with as the units that now remain, fall within the share of the respondent exclusively belong to the Respondent and have no concern with the Corporate Debtor and the ongoing insolvency proceedings.
Findings:
The tribunal observed that as the MOU was entered in between parties much prior to the CIRP, and the Corporate Debtor has already sold its share to a third party before commencement of CIRP. Along with it, the Respondent has also sold substantial number of its share of the Project.
The tribunal further observed that this makes it very clear that the Respondent's remaining share in the project is independent and has no connection with the Corporate Debtor.
Thereafter, the tribunal noted that the Respondent hereby is a third party to the proceedings and is not related to the Corporate Debtor.
The Tribunal held that “Section 19(2) of the code obligates only personnel connected with the Corporate Debtor to cooperate with the Resolution Professional (RP) for providing necessary information. Therefore, an application under Section 19(2) of the Code is not maintainable against the Respondent who is a third party.”
Accordingly, the NCLT dismissed the application filed by the IRP, since the NCLT was of the view that the Respondent is not connected with the Corporate Debtor and is not obliged to provide the IRP with the required information.
Case Title: Piramal Capital & Housing Finance Limited V/s M/s Andes Town Planners Private Limited
Case Number: CP (IB) No. 317 (ND)/ 2022, IA 3738/2023, Intervention P 28/2024
Judgement Date: 16.01.2025
For Applicant: Mr. Gaurav Singh, Mr. Shwetank Sailakwal, Advocates
For RP: Mr. Anuj Kr. Pandey, Mr. Utsav Mukherjee, Mr. Saksham Ahuja, Mr. Mayukh Roy, Advocates
For Intervener: Ms. Niharika Gupta, Mr. Raj Dev Singh, Advocates
For Respondent: Mr. Ravi Sehgal Advocate