The in New Delhi has dismissed an appeal filed by the former suspended director of KSL & Industries Ltd., confirming that the duty of to cooperate with a remains absolute even after a has secured approval from the . The appellate bench, comprising Judicial Member Justice Sharad Kumar Sharma and Technical Member Arun Baroka, upheld an order from the in Ahmedabad, which imposed a cost of ₹25,000 on the appellant, Narayan Ramchandra Ghumatkar, and another respondent for their failure to provide essential financial and administrative records.
The litigation originated from an application filed by Kiran Shah, who argued that the suspended directors of the had persistently failed to furnish critical data, including fixed asset registers, title deeds, and comprehensive employee records, despite numerous reminders via email and telephonic communication. While the appellant argued that he had already provided substantial documentation and that any remaining information was either unavailable or irrelevant given the advanced stage of the , the tribunal found that the management had failed to meet its statutory obligations.
Ongoing Statutory Obligations During Insolvency
Central to the dispute was the appellant's contention that the successful approval of a by the should create a presumption of sufficient cooperation. The tribunal firmly rejected this logic, distinguishing between the commercial decisions made by creditors and the administrative duties imposed upon . The bench observed, “Approval of a plan by the CoC is a commercial decision. It raises no presumption that the has cooperated with the RP. The may proceed on information which the RP gathers from other sources, but that does not relieve the of its duty.”
The tribunal emphasized that the obligation to assist the under is a continuing one. Partial compliance, the court noted, does not satisfy the statutory mandate, particularly when critical operational records remain withheld. The appellant had sought to justify the gaps in information by citing the passing of a fellow director, Mansi Wadkar, who had previously handled the company's financial affairs. However, the appellate court determined that such personal circumstances did not absolve the remaining board members from their responsibility to secure and deliver the corporate records necessary for the orderly completion of the insolvency process.
Jurisdictional Basis for Penalizing Conduct
During the proceedings, the appellant challenged the legal basis of the cost imposition, arguing that —which allows resolution professionals to seek directions from the —does not explicitly grant the power to impose monetary penalties. He further argued that any allegation of misconduct should instead be addressed under the penal provisions of . The tribunal dismissed this argument, clarifying that while Section 19(2) serves as a procedural mechanism for obtaining directions, the authority to impose costs is inherent in the adjudicating tribunal’s powers under Section 60(5) read with Rule 11 of the Rules, 2016.
The bench relied on established legal principles, noting that the invocation of a wrong statutory provision does not invalidate an order if the authority possesses the underlying power to pass such directions. By referencing Supreme Court precedents, the tribunal affirmed that the retains broad jurisdiction to regulate proceedings and ensure that participants, including the , adhere to the requirements of the insolvency process. The failure to comply with specific directions issued in June and was deemed sufficient evidence of a lack of cooperation, justifying the imposition of the fine.
Access to Information
The maintained that despite the progress of the insolvency resolution, several records were still required to finalize the transfer of the to the successful . Throughout the appeal, the tribunal directed both parties to provide specific tabulations detailing which documents were provided and which remained outstanding. However, the appellant failed to demonstrate that full compliance had been achieved. The tribunal noted that the impugned order by the Ahmedabad bench was based on a detailed list of outstanding information filed by the in , and the appellant had not successfully countered these claims with evidence of full disclosure.
The tribunal’s decision serves as a significant precedent, reinforcing that the duties of are not diminished by the passage of time or the successful advancement of resolution plans. The resolution process is highly dependent on the accuracy and completeness of the records maintained by the prior to the initiation of insolvency proceedings. By upholding the cost of ₹25,000, the appellate tribunal has signaled that non-cooperation by former directors—whether characterized by active obstruction or passive failure to produce records—will face judicial scrutiny and financial consequences.
The order requires the appellant to deposit the penalty amount into the . With the dismissal of the appeal, the tribunal has effectively cleared the path for the to finalize the remaining procedural aspects of the case, ensuring that the ’s records are properly accounted for, as mandated by the law governing corporate insolvencies. The matter now returns to the stage of final implementation of the , with the appellant under clear instruction to provide all documents previously identified as missing by the .
insolvency process - statutory duty
