Case: SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD INDUSTRIES LTD Vs. JSVM PLYWOOD INDUSTRIES LTD. &amp; Anr

2. An application under Section 7 of the Insolvency and Bankruptcy Code, 2016, hereinafter referred to as the IBC was admitted on 26.08.2019 against one National Plywood Industries Limited (NPIL). The Appellant was appointed as the Interim Resolution Professional. A moratorium also came to be passed by the very same order within the meaning of Section 14 of the IBC. The Appellant came to be appointed as the Resolution Professional by an order dated 08.11.2019. In the meantime, the Respondent No.1 claiming to be an operational creditor lay the claim for the amounts due to it from the Corporate Debtor before the Appellant vide communication dated 22.11.2019. It would appear that the former Managing Director of the Corporate Debtor challenged the order of the NCLT, Guwahati, admitting the application under Section 7. The NCLAT by order dated 24.11.2019 dismissed the appeal interalia holding that the application under Section 7 was not barred by limitation. Civil Appeal No. 9142 of 2019 filed by the former Managing Director of the Corporate Debtor came to be however allowed by this Court by an order dated 20.01.2020. The NCLT was directed to consider the matter in accordance with law. It would appear that on 28.01.2020 interlocutory application 7 of 2020 filed by the former Managing Director of the Corporate Debtor seeking an injunction restraining the Respondents therein from interfering in the operation of the Corporate Debtor and to disperse the cost of the CIRP was disposed of interalia as follows: -i. Today the Respondents submitted across the Bar that except ratifying the expenses of the IRP, no major decisions have been taken by the COC in the yesterdays COC meeting. Both the respondents informed that they are conscious about the order passes by the Honble Supreme Court and the legal consequences thereof.ii. In view of the above submissions of the respondents, this Tribunal expects that the respondents would maintain status-quo in respect of the IRP proceedings. As the main company petition was remanded back to the Honble NCLAT for fresh disposal in accordance with law, this Tribunal is of the considered opinion that the petitioner has to approach the Honble NCLAT for any further directions in the above matter and accordingly above application stands disposed of with the above observations. Even otherwise, the order of admission of the company petition has not attained finality and, therefore, no interim orders as prayed for needs to be passed today.iii. In the result, IA No. 07 of 2020 is disposed of with the above observations.Thereafter there is order dated 20.03.2020 passed which we will advert to.3. It is the case of the Appellant that the former Managing Director of the Corporate Debtor in conspiracy with the Respondent No.1 engaged in an illegal transaction to the tune of Rs. 32.50 lakhs without authority from the Appellant and in violation of Section 14 of the IBC. It is his complaint that initially, the Managing Director made a transaction of Rs. 500. Thereafter, he proceeded by virtue of 4 consecutive transactions to transfer a sum of Rs. 32.50 lakhs to the Respondent No. 1. It is also complaint of the Appellant that the former Managing Director proceeded to transfer another sum of Rs. 3.29 lakhs from another account and the amount was transferred to his close associate.4. On 23.04.2020, the Appellant filed a cyber complaint. This was followed on the same date by filing an application under Section 19 read with Section 23 (2) of the IBC alleging non corporation by the previous management of the Corporate Debtor. On 27.04.2020, the Appellant got lodged an FIR. On 04.05.2020 the ICICI Bank created a lien upon the bank account of the Respondent No. 1 based on the allegedly illegal transaction. The next development to be noticed is the order dated 20.05.2020 passed by the NCLT, Guwahati. The order is passed in I.A. No. 37 of 2020. The relief sought therein was for direction to the Directors of the Corporate Debtor to hand over the management of the company. The order reflects the controversy relating to the payment of Rs. 32.50 lakhs violating the moratorium. Tribunal finds that the directors of the Corporate Debtor were not giving maximum assistance. On the basis of its findings the tribunal issued directions to the suspended Board of the Corporate Debtor to cooperate with the Appellant. The Auditors were to complete the audit expeditiously interalia. More importantly the Directors were directed to refund the amount withdrawn less the amount if any paid to the alleged supplier as the cost of raw materials. The interlocutory application was posted before the regular bench for hearing after lifting the lockdown.5. A perusal of the order reveals that the Directors of the company sought to defend the withdrawal of Rs.32.50 lakhs as one intended to pay for the raw materials. It is further noticed that the Tribunal noticed that there was no proof for the same. More importantly it was found that even if done to discharge debt due to supplies during the CIRP, without permission and knowledge of the Resolution Professional, it was in violation of Section 14 of the Code.6. The Appellant moved an application for review of the order dated 20.05.2020. The Tribunal in its order dated 05.06.2020 noticed the limitations flowing from Rules 154 and 155 of the NCLT, Rules, 2016 in the matter of review. It is observed that for the reasons highlighted in the 20.05.2020 the former Directors of the Corporate Debtor are found prima facie liable to refund the amount unauthorisedly withdrawn from the account of the Corporate Debtor. It is also noticed that the Directors of the suspended board were not made respondents. The application for review came to be dismissed.7. The genesis of the impugned order is the FIR lodged against the Appellant and arose from the payment effected into the account of Respondent No.1 in a sum of Rs. 32.50 lakhs. The said FIR came to be challenged in a petition under Section 482 of the Cr.P.C. by the Respondent No.1 by filing Criminal Petition No. 454 of 2020. In the same the Appellant also filed I.A. No. 453 of 2020.8. On 19.01.2021 the NCLT, Guwahati passed an order in I.A No. 37 of 2020. By the said order the Appellant was directed to discharge his duties as per the provisions of the IBC. Thereafter, it also passed the following directions: -i. The Learned Counsel for the Respondents has confirmed that the Suspended Management has been co-operating and providing assistance toRP to complete the CIRP in time. The Corporate Debtor is directed to submit its reply Affidavit to the allegations made relating to the transactions of Rs. 35.795 lakhs serving a copy upon the RP.ii. Any amount of the Corporate Debtor lying in any Bank is to be transferred to the account being operated by the RP. Banks having account of the Corporate Debtor are directed to lift the lien, if any, on any amount of the Corporate Debtor and allow the operation of the account by the RP only.iii. The RP is directed to utilize the funds of the Corporate Debtor under CIRP judiciously keeping the Unit in its full operation.9. Thereafter, in the petition filed by the Respondent No.1 under Section 482, the High Court admitted the petition. The case was directed to be listed for regular hearing in usual course. (According to the Appellant the High Court had directed investigation to be continued. This is not seen reflected in the order which is produced). In the I.A No. 453 of 2020 filed in the Section 482 resulting in the impugned order, the prayers sought has already been noted. It is to allow the Respondent No.1 and its creditors to operate their bank account over which lien has been created and those accounts which have been frozen based on the FIR dated 27.04.2020.THE IMPUGNED ORDER10. After noticing the contentions of the parties, the Learned Single Judge in the impugned order proceeds to hold as follows:-i. From the material on record, it is apparent that there was business relation between the petitioner company and the NPIL, which is evident from the various documents annexed to the petition. Only question raised in this FIR is that the money was transferred by the suspended CMD without any authority, inasmuch as, the entire state of affairs of NPIL was vested with the Respondent No. 2, who has been appointed as resolution professional. Only incriminating allegation against the petitioner is that the suspended CMD has personal interest in the petitioner company being an associate company, which is however, a disputed fact required to be investigated by police.ii. Be that as it may, having considered the entire gamut of the matter and the nature of accusation brought against the present petitioner, I am of the view that freezing of all the bank account as indicated above would certainly cause unnecessary hardship, which may not be necessary for the investigation of the present FIR in view of the nature of the accusation made therein as well as in view of the offer made by the petitioner to furnish a bond. Therefore, in my consider view, the petitioner is entitled to the interim relief as sought for. Accordingly, it is provided that the lien created upon the bank account no. 149905001306 maintained with the ICICI Bank Limited, Chandrasekarpur Branch, Bhubaneswar be lifted, the petitioner and its creditors shall be allowed to operate the bank account over which lien has been created and the accounts have been frozen pursuant to the instruction of the Respondent No. 2 in connection with Margherita P.S. Case No. 0112/2020, until further order of the Court.iii. It is however, made clear that the interim relief granted to the petitioner as above with regard to unfreezing the bank account and lifting of lien shall be subject to the condition that the petitioner shall withdraw the WP (C) No. 118/2020 filed before the Itanagar Permanent Bench of this Court and furnishing an indemnity bond undertaking to refund the amount of Rs. 32.50 Lakhs if required, subject to final outcome of the criminal case.

Court's reasoning:
16. The contours of the jurisdiction under 482 of the Cr.P.C. are far too well settled to require articulation or reiteration. Undoubtedly, in this case by 26.08.2019 an application filed under section 7 of the IBC was admitted, the appellant appointed as the interim resolution professional and what is more a moratorium declared. With the declaration of the moratorium the prohibitions as enacted in section 14 came into force. It is clear that the assets of the company would include the amounts lying to the credit in the bank accounts. There cannot be any dispute that well after the order under section 14 was passed, a sum of Rs. 32.50 lakhs has been remitted into the account of Respondent No.1 company. No doubt it is the definite case of the Respondent No.1 that it has had business relations with the Corporate Debtor since more than 15 years and that the amount remitted in its account represented the price of the materials supplied to the Corporate Debtor. Apart from this amount a sum of rupees more than Rs.39 lakhs is still due. It is to be noticed that though an appeal was filed against the order admitting the petition under Section 7 the same was dismissed by the NCLAT. The appellate order was undoubtedly set aside by this court and the appeal remanded to the NCLT for its consideration. We would think that setting aside the appellate order of the NCLAT by this court and remanding the appeal would not have the effect of setting aside the order admitting the application. Initially, as was noticed by us an order was passed on 28.02.2020. The ambiguity created by the said order was removed by the subsequent order of the Tribunal dated 20.03.2020. In other words, by the order dated 20.03.2020 the NCLT, Guwahati ordered that the appellant was at liberty to act as per law and the words used in the earlier order dated 28.02.2020 relied upon by the Respondent No.1 were found to be a mere casual observation which did not culminate into any direction. We need not say anything further particularly in view of the fact that there is an FIR and which is pending consideration in the High Court also. It is significant only for us to notice that the Appellant is essentially aggrieved by the transactions representing a sum of Rs. 32.50 lakhs all of which took place after order dated 20.03.2020.17. It may be true that in the interim order passed by the NCLT Guwahati, the Tribunal had directed the Directors to refund the amount of the Corporate Debtor less any amount paid for supplies. It is also true that the review petition filed by the Appellant is dismissed, essentially based on the limitations on the power of review.18. The provisions of the IBC contemplate resolution of the insolvency if possible, in the first instance and should it not be possible, the winding up of the Corporate Debtor. The role of the insolvency professional is neatly carved out. From the date of admission of application and the appointment of Interim Resolution Professional, the management of the affairs of the Corporate Debtor is to vest in the Interim Resolution Professional. With such appointment, the powers of the Board of Directors or the partners of the Corporate Debtor as the case may be are to stand suspended. Section 17 further declares that the powers of the Board of Directors or partners are to be exercised by the Interim Resolution Professional. The financial institutions are to act on the instructions of the Interim Resolution Professional. Section 14 is emphatic, subject to the provisions of sub section (2) and (3). The impact of the moratorium includes prohibition of transferring, encumbering, alienating or disposing of by the Corporate Debtor of any of its assets.22. This provision was inserted with effect from 28.12.2019. No doubt under this provision goods or services not covered by Section 14(2) are also covered. The call however is to be taken by the IRP/RP. Raw material supply could fall within the provision. The IRP/RP must take a decision guided purely by the object of the IBC and the provisions and the factual matrix.23. With the appointment of Committee of Creditors, a Resolution Professional is to be appointed. The Resolution Professional is thereafter to conduct the resolution process and manage the operations. Section 23 (2) makes it clear that his power is the same as the powers of the Interim Resolution Professional. Undoubtedly, the Resolution Professional is bound to seek prior approval of the Committee of Creditors in maters covered by Section 28.24. We have to also in this context bear in mind that the High Court appears to have, in passing the impugned order, which is an interim order for that matter, overlooked the salutary limits on its power under Section 482. The power under Section 482 may not be available to the Court to countenance the breach of a statuary provision. The words to secure the ends of justice in Section 482 cannot mean to overlook the undermining of a statutory dictate, which in this case is the provisions of Section 14, and Section 17 of the IBC.25. It would appear to us that having regard to the orders passed by the NCLT admitting the application, under Section 7, and also the ordering of moratorium under Section 14 of the IBC and the orders which have been passed by the tribunal otherwise, the impugned order of the High Court resulting in the Respondent No. 1 being allowed to operate the account without making good the amount of Rs 32.50 lakhs to be placed in the account of the Corporate Debtor cannot be sustained.