Insolvency and Bankruptcy Code, 2016. Once an insolvency professional is appointed to manage company, erstwhile directors cannot litigate on behalf of the company. also see Party violating the interim order. Court may refuse to hear him on merits of the case. Karnataka High Court 4:9:2020.
M/s Alpine Wineries Pvt Ltd vs M/s. Pridhvi Asset Reconstruction. Writ Petition 1631 /2020. Decided on 4 September 2020. Justice P.S. Dinesh Kumar. Judgment link: https://karnatakajudiciary.kar.nic.in/noticeBoard/wp-1631-2020right-of-audience.pdf
Held: Para 16. In the case of INNOVENTIVE INDUSTRIES LIMITED Vs. ICICI BANK AND ANOTHER (2018) 1 SCC 407, relied upon by Shri Jagadeesh, the Hon’ble Supreme Court has held that once the insolvency professional is appointed, the erstwhile Directors who are no longer in Management could not have maintained the appeal before the Supreme Court of India by holding thus:
“11. Having heard the learned counsel for both the parties, we find substance in the plea taken by Shri Salve that the present appeal at the behest of the erstwhile Directors of the appellant is not maintainable. Dr. Singhvi stated that this is a technical point and he could move an application to amend the cause title stating that the erstwhile Directors do not represent the Company, but are filing the appeal as persons aggrieved by the impugned order as their management right of the Company has been taken away and as they are otherwise affected as shareholders of the Company. According to us, once an insolvency professional is appointed to manage the Company, the erstwhile Directors who are no longer in management, obviously cannot maintain an appeal on behalf of the Company. In the present case, the Company is the sole appellant. This being the case, the present appeal is obviously not maintainable. However, we are not inclined to dismiss the appeal on this score alone. Having heard both the learned counsel at some length, and because this is the very first application that has been moved under the Code, we thought it necessary to deliver a detailed judgment so that all Courts and Tribunals may take notice of a paradigm shift in the law. Entrenched managements are no longer allowed to continue in management if they cannot pay their debts.”
20. In PRESTIGE LIGHTS LTD., VS . STATE BANK OF INDIA (2007) 8 SCC 449, it is held that an order passed by competent court -interim or final – has to be obeyed without any reservation. If such order is disobeyed, court may refuse the party violating such order to hear him on merits. In that case, the order of the Court was not complied with by the petitioner therein. In this case, petitioner has given repeated assurances but not fulfilled them.
21. Therefore, in the facts and circumstances of this case, keeping in view the conduct of the petitioner and the law laid down in INNOVENTIVE INDUSTRIES LIMITED, in the opinion of this Court, petitioner is not entitled for the discretionary relief under Article 226 of the Constitution of India.
Compiled by: S.Basavaraj, Daksha Legal.
Daksha Legal 