Case Note & Summary
The appeal was filed by the erstwhile statutory auditor of a corporate debtor (CD) against an order of the Adjudicating Authority directing him to provide certain information to the Resolution Professional (RP). The appellant was appointed as the statutory auditor for the financial year 2017-2018 but was removed shortly after the initiation of Corporate Insolvency Resolution Process (CIRP) against the CD. The RP sought information related to a limited review report prepared by the appellant, alleging non-cooperation. The appellant contended that he had already shared all available documents and that the RP's requests were unreasonable, given that he had resigned and had no access to the CD's records. The Adjudicating Authority had previously directed the appellant to cooperate, but the appellant argued that the RP had failed to establish a legitimate need for the information. The court analyzed the obligations under Section 19 of the Insolvency and Bankruptcy Code, 2016, concluding that the statutory auditor, not being part of the management of the CD, could not be compelled to provide information he did not possess. The court found that the RP's insistence on obtaining information was unfounded, especially since the CIRP had concluded and the CD was ordered to be liquidated. Ultimately, the court set aside the order of the Adjudicating Authority, emphasizing the lack of evidence regarding the auditor's possession of the requested information and the futility of the RP's demands post-liquidation.
Headnote
A) Insolvency Law - Statutory Auditor's Obligations - Information Sharing - Insolvency and Bankruptcy Code, 2016, Section 19 - The statutory auditor's role does not equate to management of the corporate debtor, and thus, the obligation to provide information under Section 19 does not apply. The court held that the auditor, having been removed and lacking access to records, cannot be compelled to furnish information that he does not possess (Paras 10-12).
Issue of Consideration
Whether the statutory auditor is obligated to provide information to the Resolution Professional under the Insolvency and Bankruptcy Code, 2016.
Final Decision
The appeal was allowed, and the order of the Adjudicating Authority dated 21.10.2022 was set aside, concluding that the statutory auditor could not be compelled to provide information he did not possess.
Law Points
- Statutory audit
- Corporate Insolvency Resolution Process
- Cooperation obligations
- Information sharing
- Role of statutory auditor
