Tribunal holds that Resolution Professional remains obligated to cooperate post-resolution plan approval; successful resolution applicants exempted from furnishing documents due to lack of possession
In a significant ruling on October 7, 2026, the National Company Law Tribunal (NCLT), Indore Bench, presided by Mr. Brajendra Mani Tripathi (Judicial Member) and Mr. Man Mohan Gupta (Technical Member), partially allowed the application filed by Mr. Gagan Jhavar, the liquidator of M/s Arya Filaments Private Limited. The liquidator sought directions under Section 19(3) of the Insolvency and Bankruptcy Code (IBC), 2016, read with Regulation 9 of the IBBI (Liquidation Process) Regulations, 2016, compelling various stakeholders to cooperate and furnish documents and information necessary for conducting the liquidation process.
Background and Parties:
The corporate debtor, Arya Filaments Private Limited, underwent Corporate Insolvency Resolution Process (CIRP) initiated by Kotak Mahindra Bank Limited's Section 7 application admitted on August 17, 2018. Mr. Ravi Kapoor served as Interim Resolution Professional (IRP) and subsequently as Resolution Professional (RP). Respondents included suspended directors Mr. Surendra Kumar Agrawal and Mr. Nanuram Agrawal, the erstwhile RP, and successful resolution applicants Mr. Rajendra Shinde, Mr. Rajesh Gupta, and Mr. Sanjiv Gupte.
The resolution plan submitted by the resolution applicants was approved on October 23, 2020. However, failure to comply with the plan led to liquidation ordered on November 2, 2023, with Mr. Jhavar appointed as liquidator. The liquidation order mandated all personnel, including the RP, to cooperate and hand over relevant documents and control to the liquidator.
Contentions and Proceedings:
Post-liquidation, the liquidator faced significant difficulties in obtaining the corporate debtor's books, registers, Tally data, and other crucial documents. The suspended directors and the erstwhile RP shifted responsibility for the records among themselves and the successful resolution applicants. The resolution applicants denied possession of the corporate debtor's assets and records, noting that the first installment under the resolution plan was never paid, preventing possession transfer.
The liquidator made several documented attempts from November 2023 onward to secure cooperation, including emails specifying detailed lists of documents required. Despite some assistance, the liquidator highlighted discrepancies in financial data, lack of proper inventory, and incomplete handover of records, hampering asset valuation, claim verification, and compliance with statutory notices from PF, Income Tax, and GST authorities.
Key Legal Findings:
The Tribunal observed the following critical points in its judgment:
1. Scope of Regulation 9(1) of Liquidation Process Regulations:
The regulation empowers the liquidator to seek directions against persons who are or have been officers, auditors, employees, promoters, partners, interim resolution professionals, resolution professionals, or previous liquidators of the corporate debtor, or those in possession of its properties. The Tribunal clarified that suspended directors and the erstwhile RP fall within this ambit and are thus obligated to cooperate.
2. Resolution Professional's Obligation Post Plan Approval:
The plea that the RP became functus officio (ceased to have authority) after plan approval was rejected. The liquidation order explicitly directed the RP to hand over documents and control to the liquidator. The Tribunal emphasized that furnishing information and records is distinct from performing liquidation functions, and hence the RP must comply.
3. Reasonable Efforts by Liquidator:
The liquidator had made reasonable efforts prior to filing the application by engaging the respondents via multiple correspondences detailing the documents sought. The Tribunal found this satisfies the procedural requirement of making reasonable efforts before approaching the Tribunal.
4. Successful Resolution Applicants' Position:
The applicants denied possession of the corporate debtor's assets and records. The Tribunal found no material evidence that possession had passed to them, especially given non-payment of the first installment under the resolution plan. Consequently, no directions could be issued against them under Regulation 9.
5. Custody of Documents and Records:
While the exact current custody of individual documents was disputed, the Tribunal found sufficient grounds to direct the suspended directors and RP to file detailed affidavits specifying which documents they possess or have handed over, and who currently holds others. This includes books of account, supporting documents, Tally data, lease cancellation papers, and details of appeals related to the lease.
6. Accounting and Cash Balance:
The suspended directors were directed to account for the cash balance as on the liquidation commencement date and to hand over the remaining balance to the liquidator.
Directions and Outcome:
The Tribunal partly allowed the liquidator's application with the following key directions:
- Suspended directors (Respondent Nos. 1 and 2) and erstwhile RP (Respondent No. 3) to furnish all documents and information in their possession or control within 30 days.
- Filing of affidavits by these respondents clarifying document-wise custody, handovers, and current holders.
- Disclosure by RP regarding instructions for certain bank deposits created post-liquidation.
- Provision of documents related to lease cancellation and appeals.
- Suspended directors to reconcile and hand over cash balances with supporting vouchers.
- Liberty granted to the liquidator to file fresh applications for non-compliance.
The application against the successful resolution applicants was dismissed for lack of evidence establishing possession.
Significance:
This judgment underscores the broad scope of cooperation mandated under the IBC and its regulations during liquidation. It clarifies that erstwhile resolution professionals cannot evade their obligation to assist liquidators, even after the resolution plan is approved. Moreover, it delineates the limits of directions against successful resolution applicants based on possession evidence, ensuring procedural fairness.
The ruling will assist liquidators in navigating challenges related to record retrieval and cooperation in liquidation cases, reinforcing the importance of statutory compliance by all stakeholders.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Liquidator can seek cooperation and documents not only from suspended directors but also from erstwhile Resolution Professional under Section 19 read with Regulation 9 of Liquidation Process Regulations - Plea of Resolution Professional having become functus officio after approval of resolution plan does not defeat obligation to furnish information and records required for liquidation - No direction can be issued against successful resolution applicants in absence of proof that they were in possession of corporate debtor's properties or records.
Statutory provision(s):
Section 19(2), Section 19(3) of Insolvency and Bankruptcy Code, 2016; Regulation 9 of IBBI (Liquidation Process) Regulations, 2016
Mr. Gagan Jhavar v. Mr. Surendra Kumar Agrawal, (NCLT)(Indore) : Law Finder Doc Id # 2995429
