Case 13-23855-GLT

Doc 210

Filed 04/08/14 Entered 04/08/14 14:21:08 Document Page 1 of 7

Desc Main

IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA _____________________________________ In re: : : Case No. 13-23855-GLT PRITHVI CATALYTIC, INC. : Chapter 11 : Debtor. : : KYKO GLOBAL, INC., a Canadian : Related to Doc. No. 191 Corporation, and KYKO GLOBAL GmbH, : a Bahamian corporation, : : Movants, : v. : : Hearing Date: April 1, 2014 at 10:30 a.m. PRITHVI CATALYTIC, INC., : : Respondent. : : ORDER GRANTING MOTION OF CREDITORS KYKO GLOBAL, INC. AND KYKO GLOBAL GMBH TO COMPEL RULE 2004 EXAMINATION OF MADHAVI VUPPALAPATI Before the Court is the Motion of Creditors Kyko Global, Inc. and Kyko Global GmbH to Compel Rule 2004 Examination of Madhavi Vuppalapati [Doc. No. 191] (the Motion) filed by Kyko Global, Inc. and Kyko Global GmbH (together, Kyko), the Response in Opposition to Motion [Doc. No. 199] (the Response) filed by Madhavi Vuppalapati (Vuppalapati), the Reply of Kyko in Support of Motion [Doc. No. 207] (the Reply), and the Sur-Reply in Opposition to Motion [Doc. No. 209] (the Sur-Reply). The Court held a hearing (the Hearing) to consider the Motion on April 1, 2014. Prithvi Catalytic, Inc. (the Debtor) did not take a position with respect to the Motion, nor did its counsel appear at the Hearing. For the reasons set forth herein, and on the record at the Hearing, the Motion is granted.

Case 13-23855-GLT A.

Doc 210

Filed 04/08/14 Entered 04/08/14 14:21:08 Document Page 2 of 7

Desc Main

Vuppalaptis Role With the Debtor

Vuppalapati presented herself to this Court as the Debtors President and Chief Executive Officer (CEO). In that capacity, she signed the Debtors voluntary petition for bankruptcy relief. She also verified the accuracy of the Debtors bankruptcy schedules and its statement of financial affairs. Despite her role as President and CEO, and her knowledge of the Debtor and its business, Vuppalapati never has appeared before this Court. While the Debtors chief financial officer was recently given authority to make necessary decisions related to the Debtors operations, the Court is unaware of any effort by Vuppalapati to relinquish her position within the Debtors organization.1 B. Kykos Examination Notice and Subpoena

Kyko, a creditor and party in interest in this case, gave notice (the Notice) of its intent to examine Vuppalapati pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules) by letter to Debtors counsel on December 17, 2013. See Motion at Exhibit A.2 According to the Notice, the examination was to take place on January 15, 2014, more than 28 days after the date of the Notice. The Notice identifies the scope of the examination. Specifically, Kyko seeks to examine Vuppalapati on the following topics:

See Agreed Order Resolving the: (I) Emergency Motion of Creditors Kyko Global, Inc. and Kyko Global GmbH for an Order Directing the Appointment of a Chapter 11 Trustee Pursuant to 11 U.S.C. 1104(a)(1) and 1104(a)(2) and Request for an Expedited Hearing; and (II) Motion to Use Cash Collateral. [Doc. No. 77]. Kyko asserts that the Notice followed several attempts to schedule a mutually-convenient date for the examination with Debtors counsel. Although the Court is not familiar with the extent of these discussions, it was informed during hearings held on October 30, 2013 and November 26, 2013 that Kyko was pursuing Vuppalapatis examination. See Proceeding Memos [Doc. Nos. 69 and 100].

Case 13-23855-GLT

Doc 210

Filed 04/08/14 Entered 04/08/14 14:21:08 Document Page 3 of 7

Desc Main

(i) all of the matters set forth in Federal Rule of Bankruptcy Procedure 2004(b) as related to [the Debtor]; (ii) all of the Debtors equity security holders from June 1, 2011 through and including the present; (iii) any and all documents regarding the equity ownership of the Debtor from June 1, 2011 through and including the present; and (iv) any and all documents regarding any transfers of equity ownership in the Debtor within the past twelve (12) months. See Notice at p. 1. The scope of the examination falls within Bankruptcy Rule 2004(b).3 Kyko claims the examination is necessary to verify the identity of the Debtors equity owners. As the proponent of the First Amended Plan of Reorganization for the Debtor [Doc. No. 185] (the Plan), Kyko maintains that the information is necessary to ensure that equity holders receive adequate notice of the Plan.4 Since a hearing on the Plans Disclosure Statement [Doc. No. 186] is already set for April 15, 2014, Kyko suggests that its ability to pursue confirmation of the Plan is impaired without the ability to serve (with certainty) the Plan and related documents on all of the Debtors equity holders in the event that the Disclosure Statement is approved. Kyko served a subpoena on Vuppalapati on December 27, 2013. Vuppalapati responded to the subpoena through her counsel, Mark D. Kimball, Esq. (Kimball). By letter dated December 30, 2013, Kimball stated that he would appear at the examination on Vuppalapatis behalf. See Motion at Exhibit A. At no time did Kimball object to the form or content of the subpoena. Instead, Kimball requested that the examination be rescheduled for a mutually convenient date. He also agreed to accept service of an amended subpoena and pledged to provide documents responsive to Kykos requests.5

Neither Vuppalapati nor the Debtor raised any objection to the scope of the exam requested by Kyko. Kyko alleges that the list of equity holders on the Debtors Statement of Financial Affairs is inconsistent with other sworn statements previously provided by Vuppalapati. Although not necessary for the disposition of this matter, the Court agrees with Kyko that Vuppalapati, through her counsel, waived any objection to the form of the subpoena.

Case 13-23855-GLT

Doc 210

Filed 04/08/14 Entered 04/08/14 14:21:08 Document Page 4 of 7

Desc Main

Thereafter, Vuppalapati and Kyko (each through counsel) exchanged a series of communications to reschedule the examination. From the record, it appears that Vuppalapati first resisted the examination on January 22, 2014, when her local counsel objected to the form of the subpoena and indicated she would not appear for the re-scheduled examination the next day. See Motion at Exhibit D. In the following weeks, Vuppalapati was non-committal about a new examination date when pressed by Kykos counsel. Her counsel explained the need to have criminal counsel attend the examination and could not offer a date until criminal counsel responded as to his availability. After several failed attempts to secure a mutually agreeable date, Kyko filed its Motion on March 7, 2014. Vuppalapati opposes the Motion on the basis that she is under no obligation to appear for a Bankruptcy Rule 2004 examination without a valid subpoena, and according to Vuppalapati, Kykos subpoena is defective. C. Relief Pursuant to Bankruptcy Rule 2004

Parties in bankruptcy cases are afforded a broad right of inquiry pursuant to Bankruptcy Rule 2004. Bankruptcy Rule 2004(a) states that [o]n motion of any party in interest, the court may order the examination of any entity. Fed. R. Bankr. P. 2004(a).

Moreover, [t]he court may for cause shown and on terms as it may impose order the debtor to be examined under this rule at any time or place it designates, whether within or without the district wherein the case is pending. Id. at 2004(d). As a creditor and party in interest, Kyko is entitled to request an order from this Court allowing it to examine any entity, including the Debtor, pursuant to Bankruptcy Rule 2004. The scope of the requested examination, as set forth in the Notice, appears to fall soundly within Bankruptcy Rule 2004(b). Vuppalapati, as the Debtors President and CEO, is certainly

Case 13-23855-GLT

Doc 210

Filed 04/08/14 Entered 04/08/14 14:21:08 Document Page 5 of 7

Desc Main

the person with knowledge of the Debtors financial condition.6 After all, she is the individual that declared, under penalty of perjury, that the contents of the Debtors bankruptcy petition and its related filings and disclosures are true and correct. When asked directly about the scope of Kykos inquiry, Vuppalapatis counsel acknowledged that it fell within the permissible framework allowed under Bankruptcy Rule 2004. Hiding behind procedural safeguards designed to protect third-parties, Vuppalapati forgets her role in this case. She is not a third-party witness that, by chance, has information related to this bankruptcy estate. Rather, it was her signature on the petition that requested bankruptcy relief from this Court. She submitted declarations to this Court regarding the Debtors assets, liabilities, and business affairs. She is the individual who verified the identities of the Debtors shareholders, which is among the information Kyko seeks from the examination. As the Debtors President and CEO, Vuppalapati speaks and acts for the Debtor. In this context Bankruptcy Rule 9001(5) provides some guidance: When any act is required by these rules to be performed by a debtor or when it is necessary to compel attendance of a debtor for examination and the debtor is not a natural person: (A) if the debtor is a corporation, debtor includes, if designated by the court, any or all of its officers, members of its board of directors or trustees or of a similar controlling body, a controlling stockholder or member, or any other person in control . . .). See, e.g., Fed. R. Bankr. P. 9001(5). As an officer and director of the Debtor, Vuppalapati falls within Bankruptcy Rule 9001(5). Moreover, given the Debtors filings in this case, she also is the person most likely to possess information of the type identified in Bankruptcy Rule 2004(b).

Any argument that the Debtor shall designate its representative pursuant to Federal Rule of Civil Procedure 30(b)(6), as incorporated by Bankruptcy Rule 7030, is misplaced. Bankruptcy Rule 7030 applies to adversary proceedings, or, pursuant to Bankruptcy Rule 9014, contested matters. The matter before the Court arose neither within an adversary proceeding nor as a contested matter.

Case 13-23855-GLT D.

Doc 210

Filed 04/08/14 Entered 04/08/14 14:21:08 Document Page 6 of 7

Desc Main

This Court Has the Power to Compel a Rule 2004 Examination

Bankruptcy courts are courts of equity with broad powers of administration of bankruptcy proceedings. See, e.g., Official Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery (In re Cybergenics Corp.), 330 F.3d 548, 567 (3d Cir. 2003). Among these powers is the broad discretion to manage the discovery process in a fashion that will implement the philosophy of full disclosure of relevant information . . . . In re Mittco, Inc., 44 B.R. 35, 38 (Bankr. E.D. Wis. 1984). Third parties having knowledge of the debtors affairs, as well as a debtor itself, are subject to examination. In re Valley Forge Plaza Assocs., 109 B.R. 669, 674 (Bankr. E.D. Pa. 1990) (citations omitted). Had Kykos Notice been directed to the Debtor, Vuppalapati also would be subject to the examination under Bankruptcy Rule 9001(5). That Kyko directed its Notice to Vuppalapati rather than the Debtor is a distinction without a difference where, as here, the person to be examined is the same. By its Motion, Kyko seeks relief under Bankruptcy Rule 2004. Although not specifically indicated, the Court determines that both Bankruptcy Rule 2004(a) and (d) apply here. The examination seeks information that pertains to the Debtor on a subject which Vuppalapati previously has provided verified statements to the Court. See Statement of

Financial Affairs, #21 [Doc. No. 11]. Accordingly, the Court will treat the Motion as a request under Bankruptcy Rule 2004(d) to order the examination of the Debtor. Indeed, the respondent to the Motion (as indicated by Kyko) is the Debtor, not Vuppalapati, and it initially was served upon the Debtors counsel who discussed scheduling arrangements with Kyko. The initial response was offered by Mr. Kimball in his capacity as both personal counsel to Vuppalapati and the Debtor.7 Given Vuppalapatis role with the Debtor, this Court finds that she is the

appropriate person to testify with respect to the matters set forth in Kykos Notice, and Kyko has
7

For the moment, the Court has set aside its concerns with this statement as no application has been filed to retain Mr. Kimball as counsel to the Debtor. Without knowing the scope of this engagement, the Court cannot ascertain whether the dual representation presents an impermissible conflict of interest.

Case 13-23855-GLT

Doc 210

Filed 04/08/14 Entered 04/08/14 14:21:08 Document Page 7 of 7

Desc Main

shown sufficient cause for this Court to compel the Debtor to be examined under Bankruptcy Rule 2004(d). The Court also designates Vuppalapati pursuant to Bankruptcy Rule 9001(5) for purposes of the Bankruptcy Rule 2004 examination. As such, the Notice and this Order are sufficient to require her participation in a Bankruptcy Rule 2004 exam. AND NOW, for the foregoing reasons, and for the reasons set forth on the record at the Hearing; it is hereby ORDERED, ADJUDGED, and DECREED that: 1. Vuppalapati, on behalf of the Debtor, shall make herself available for an

examination under Federal Rule of Bankruptcy Procedure 2004 within 30 days of the date of this Order. The parties shall work together to schedule a mutually-convenient date and manner by which to conduct the exam. 2. For the reasons stated on the record, Kyko (at its option) may serve written

interrogatory and discovery requests upon Vuppalapati, through her counsel and counsel to the Debtor, concerning the matters referenced in the Notice. Responses to these requests shall be due within 21 days of service. The service of these requests shall be without prejudice to Kykos ability to conduct a Bankruptcy Rule 2004 examination in person or through video conference. 3. The Court will consider imposing sanctions (including, without limitation,

monetary sanctions), and may hold parties (including Vuppalapati) in contempt for failing to act in good faith and otherwise comply with the terms of this Order.

Dated: April 8, 2014 FILED 4/8/14 1:55 pm CLERK U.S. BANKRUPTCY COURT -

__________ ____ __ __________ __ ____ __ ______________ __ _____________________________________ GREGORY Y L. TADDONIO O UNITED STATES BANKRUTPCY JUDGE