The National Company Law Appellate Tribunal (NCLAT) when proceedings before the Adjudicating Authority are being carried out under the IBC penalty can only be imposed by Companies Act, 2013.
The case, as stated by the Appellant, Mr. Ashish Chaturvedi is that an application under section 9 of IBC was admitted vide order of the Adjudicating Authority dated 5.12.2018, and CIRP was initiated against the Corporate Debtor along with the appointment of Interim Resolution Professional. During the pendency of the Corporate Insolvency Resolution Process (CIRP), the IRP moved two applications under section 19(2) and section 60 (5) of the IBC alleging that Appellant had withdrawn a sum of Rs. 32 lakhs during the moratorium period during the CIRP though the Appellants claimed that they had given a postdated cheque to one Mr. Kewal Kishan as repayment of a loan and the said cheque was not given by them during the ongoing CIRP the Adjudicating Authority allowed both the applications and vide Impugned Order, the Adjudicating Authority has imposed a penalty of Rs. Five lakhs on each of the two ex-directors Ashish Chaturvedi and Sanjay Kapoor (Appellants in this appeal) to be deposited in the account of the Government of India, Ministry of Corporate Affairs.
The application under section 19(2) which is to secure the cooperation of ex-directors of the corporate debtor for providing records and other financial information relating to the Corporate Debtor to the Resolution Professional was listed before the Adjudicating Authority on 25.2.2020, 30.9.2020, 19.10.2020, and 2.11.2020 and on all these dates the ex-directors of the corporate debtor were directed to file a reply to the said application. In the absence of any reply from the ex-directors/Appellants the Adjudicating Authority has invoked section 128 (6) of the Companies Act and levied a penalty of Rs. Five lakhs each on the Appellants No. 1 and 2 and hence the Appellants have filed this appeal praying for setting aside of the impugned order.
The Appellants submitted that the Adjudicating Authority has imposed the penalty of 5 lakhs each on the Appellants exercising powers under section 128(6) of the Companies Act, 2013, though the Adjudicating Authority which is hearing the case under the IBC did not have jurisdiction to impose such a penalty under the Companies Act.
The Coram of Chairman Justice Ashok Bhushan and Technical Member Dr. Alok Srivastava held that the Adjudicating Authority has imposed the penalty on the two ex-directors by invoking provisions of the Companies Act, 2013, and thus passed the Impugned Order by travelling beyond their jurisdiction, we are of the view that since the IA No. 1253/2020 was filed under the provisions of IBC, it would have served the requirement of law if any order regarding the penalty was imposed under the provisions of IBC. Moreover, it would have served the cause of natural justice if the Appellants were given an opportunity to be heard before imposition of any penalty. Chapter VII of the IBC which lays down “Offences and Penalties” under which officers of the Corporate Debtor can be penalized and/or punished with imprisonment is relevant in this regard.
The Tribunal directed that the case be remanded to the Adjudicating Authority for taking a decision under the provisions of IBC after giving an opportunity to the Appellants to present their case and giving due consideration of the facts of the case in IA 1253/2020. With these directions, we set aside the Impugned Order whereby a penalty of Rs. 5 lakhs each on the Appellants has been imposed and remand the matter to the Adjudicating Authority for passing necessary orders under the provisions of IBC.
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