Court ruled that prior findings negate certain fraud allegations in insolvency cases, allowing only non-cooperation charges to proceed.

ORDER :

(J.M. KHAZI, J.)

In Writ Petition No.46570/2019, filed under Article 227 of the Constitution of India r/w Section 482 of the Code of Criminal Procedure, accused Nos.2 and 5 and in Crl.P.No.7020/2019, filed under Section 482 of the Code of Criminal Procedure, accused No.3 are seeking quashing of criminal proceedings initiated against them vide order dated 10.07.2019 in Spl.C.No.783/2019 on the file of LIX Addl.Civil and Sessions Judge, Bengaluru, taking cognizance for the offences punishable under Sections 69 (a), 70(1)(c), 73(b) and 19(1) of the Insolvency and Bankruptcy Code, 2016 .

2. For the sake of convenience, parties are referred to by their ranks before the trial Court.

3. Since these two petitions are arising out of the same proceedings, the grounds urged by the respective accused are common and involves common discussion, they are clubbed together and disposed off by a common order.

4. In support of the petitions, the petitioners have contended that they are the former Directors of M/s. Bhuvana Infra Projects Private Ltd. ('The company' for short). By order dated 17.1.2018, The National Company Law Tribunal, Bengaluru under Section 7 of the Insolvency and Bankruptcy Code, 2016 ('IBC, 2016' for short) admitted a creditor's debtors and initiated corporate insolvency resolution process. At that stage, the Tribunal appointed Sri Pavan Kankani as Interim Resolution Professional ('IRP' for short). However, the first meeting of the committee of creditors, on the insistence of Bank of Maharashtra, one of the creditors of the company, the Committee decided to remove the IRP and to have one Smt Ramanathan Bhuvaneswari as proposed Resolution Professional ('RP' for short). Accordingly, on the application filed by Bank of Maharashtra by order dated 04.05.2018, the NCLT appointed Smt.Ramanathan Bhuvaneswari.

4.1 In the meeting of Committee of Creditors held on 06.10.2018, the RP presented false and incomplete information about the company and got the Committee to authorise her to file criminal proceedings against the Directors of the company. However, the NCLT in its order dated 24.10.2018 declined the prayer made by RP in IA.No.269/2018, for attaching the personal assets of the Directors, shareholders and other related entities with the company on the ground that there was fraudulent diversion of assets of the company. But, it observed that if the Committee of Creditor authorise the RP to file a criminal complaint, she may do so.

4.2 However, in the meeting of Committee of Creditors dated 29.10.2018, even before receiving the certified copy of the NCLT order dated 24.10.2018, on the basis of representation of the RP that in the said order, there is an observation that no forensic audit of the company is conducted, the RP got the Committee to appoint a Forensic Auditor to carry out forensic audit of the company and within one month, she got a report dated 14.12.2018. Instead of working towards the rehabilitating the company and assisting and advising its creditors to form a Resolution Plan for the company, from the beginning, the RP was conducting herself in a vicious and vindictive manner with a very obvious objective of only finishing of the company and threatening its Directors and shareholders to repay the dues towards Bank of Maharashtra. In this regard, accused No.2 has sent her an e-mail dated 22.11.2018. RP has sent a parawise response through email, attempting to justify her conduct.

4.3 On 17.12.2018, RP filed IA.No.446/2018 as a revised application seeking very same relief. Vide order dated 16.04.2019, the NCLT castigated the RP for filing frivolous applications and observed that there is no material to establish