NCLAT sets aside NCLT order in Videocon case

NCLAT sets aside NCLT order in Videocon case

The Appellate Tribunal confirmed that the suspended Directors, Promotors, etc. were not fully responsible for the non-availability of documents

The National Company Law Appellate Tribunal (NCLAT) has set aside an order passed by the National Company Law Tribunal (NCLT) at the Special Bench of Mumbai which directed the Promoters, Directors, etc. of the Corporate Debtor to extend full cooperation and handover all the Books of Accounts/Bank Accounts etc. to the Resolution Professional of the Corporate Debtor.

The matter titled Venugopal Dhoot And Anr v Pravin R. Navandar And Ors, was heard by the Principal Bench of NCLAT at New Delhi, comprising Justice Jarat Kumar Jain and Dr Ashok Kumar Mishra.

The facts leading up to this appeal is that the Corporate Debtor – VOVL Ltd is a wholly-owned subsidiary of Videocon Industries Limited (VIL). Both the Corporate Debtor and its holding company – VIL is currently going through the Corporate Insolvency Resolution Process (CIRP). On the application by the Respondent – Resolution Professional of the Corporate Debtor, the NCLT directed the Promoters, Directors and the persons associated with the management of Corporate Debtor - 'VOVL Limited' to extend full cooperation and handover all the Books of Accounts/Bank Accounts etc. to the Respondent. The NCLT in its order also stated that the Respondent – Resolution Professional sought the hearing and disposal of the application in such haste and also observed that the Appellants were given less than a week to file their affidavits in reply which was insufficient.

The Appellants submitted that they provided the documents in their possession till the COVID-19 pandemic led to the nationwide lockdown. It was contended by the Appellants that the Respondent gave a different written note for the list of documents before the NCLT than what was earlier asked for and that he also came up with a completely different case for funding requirement of the Corporate Debtor. Sections 18 and 19 of the Insolvency and Bankruptcy Code, 2016 (IBC) were also raised by the Appellants with regards to the demand of the Respondent for documents pertaining to the subsidiary of Corporate Debtor which is not permitted as per explanation to Section 18(1) of the Code.

The Respondent accepted the fact that they asked for the documents of the subsidiary to link up the transactions and insisted on the documents of the foreign subsidiaries in order to examine if the Corporate Debtor has entered into avoidance transactions.

The parties agreed on a list of requisite documents and from where these documents could be obtained by the Respondent, as directed by this bench. 21 list of statements/contact details/books of account/bank statements etc. were placed before this bench.

The bench found that the Financial Statement of the Corporate Debtor was available with the Respondent and he sought details of the assets of the subsidiaries, which is governed by the explanation to Section 18 of the Code. The sources where the specified documents could be obtained by the Respondent were listed by this bench in this order.

However, the bench chose not to enter into a domain where Section 18 vide its explanation of the term 'assets', shall not include assets of any Indian or foreign subsidiary of the Corporate Debtor

The bench could not get clarity on the issue of why the Respondent for more than one year could not get the books reconstructed with the assistance of an expert IT Professional from outside to ascertain avoidable transactions of the Code if he suspected something based on the inputs available with him. It made the following remarks with regards to this issue:

"What we find basically that a culture has come where Accounts people wants to do the job of Auditor, Auditor wants to do the job of Vigilance and Vigilance wants to do the job of CBI."

The bench set aside the order of the NCLT by concluding that the Appellants are not fully responsible for the non-availability of the documents with whatever data that was provided before it.