NCLAT Delhi Sets Aside Rs. 25000 Cost Imposed On Resolution Professional By AA

Background Facts

Stone India Limited (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) on 09.11.2021. The Interim Resolution Professional (“IRP”) of the Corporate Debtor had filed an application before the Adjudicating Authority, seeking co-operation from the Suspended Management. Since the Suspended Management extended cooperation at that point of time, the application was disposed off on 25.04.2022, alongwith liberty to move a fresh Application under Section 236 of IBC if cooperation is discontinued.

Subsequently, the IRP was replaced with Mr. Sanjai Kumar Gupta as the Resolution Professional on 28.02.2022. Mr. Gouri Prasad Goenka is the Suspended Director of the Corporate Debtor. When the Suspended Director discontinued cooperation, the Resolution Professional filed an application under Section 19 of IBC before the Adjudicating Authority, seeking direction to the Suspended Direction to disclose documents as requested. The application was filed in accordance with the liberty given in Order dated 25.04.2022 but under a different provision of IBC.

On 18.08.2022, the Adjudicating Authority issued notice to the Suspended Director alongwith a direction to furnish information/documents sought by the Resolution Professional before the next date. When the Suspended Director failed to comply with the order, the Adjudicating Authority directed him twice to appear in person. Subsequently, the personal attendance of the Suspended Director was dispensed with. On 02.12.2022 the Adjudicating Authority dismissed the application for being frivolous and infructuous while imposing a cost of Rs. 25,000/- on the Resolution Professional.

The Resolution Professional challenged the order dated 02.12.2022 before NCLAT.

NCLAT Verdict

The Bench observed that the orders of the Adjudicating Authority depicted that Suspended Director was neither cooperating with the Resolution Professional nor complying with the directions of Adjudicating Authority. Further, the Adjudicating Authority directed personal appearance of Suspended Director twice and noted the non-cooperation of the latter. The sudden turn of events where the application was rendered infructuous and frivolous by the Adjudicating Authority is not explained in the order dated 02.12.2022.

“The mere fact that in an earlier Application filed by RP, liberty was granted only to file prosecution, does not preclude the Adjudicating Authority to consider a subsequent Application filed by the RP due to continued noncooperation by suspended Directors. The Application had substantial grounds as evidenced from the orders of the Adjudicating Authority itself that it had issued various directions including a direction of personal appearance of Respondent No.1, which was issued after the Adjudicating Authority was fully satisfied, hence, there is no occasion to dismiss Section 19, sub-section (2) Application as frivolous and infructuous. There is not even an indication or any reason given in the order of the Adjudicating Authority, as to why cost of Rs.25,000/- was imposed on the RP.”

The Bench opined that the application contained substantial grounds and there was no occasion to dismiss the same as frivolous. Further, the order did not indicate as to why a cost was imposed on the Resolution Professional. The Bench set aside the Order dated 02.12.2022 and revived the application before the Adjudicating Authority, for passing of fresh order.

Case Title: Sanjai Kumar Gupta v Gouri Prasad Goenka

Case No.: Company Appeal (AT) (Insolvency) No.70 of 2023

Counsel for Appellant: Mr. Rishav Banerjee, Mr. Arijit Mazumdar and Mr. Siddharth Shukla, Advocates.

Counsel For the Respondent: Mr. Anirban Bhattacharya and Mr. Rajeev Chowdhary, Advocates for R-1.

Click Here To Read/Download Order