Madhavi Vuppalapati Ordered to Attend an Examination in Bankruptcy Proceedings Related to Fraud Action Commenced by Kyko Global Inc

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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 Doc 210 Filed 04/08/14 Entered 04/08/14 14:21:08 Desc Main Document Page 1 of 7

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A. Vuppalapti’s Role With the Debtor

Vuppalapati presented herself to this Court as the Debtor’s President and Chief

Executive Officer (“CEO”). In that capacity, she signed the Debtor’s voluntary petition for

bankruptcy relief. She also verified the accuracy of the Debtor’s 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 Debtor’s

chief financial officer was recently given authority to make necessary decisions related to the

Debtor’s operations, the Court is unaware of any effort by Vuppalapati to relinquish her position

within the Debtor’s organization.1

B. Kyko’s 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 Debtor’s 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:

1 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].

2 Kyko asserts that the Notice followed several attempts to schedule a mutually-convenient date for the

examination with Debtor’s 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

Vuppalapati’s examination. See Proceeding Memos [Doc. Nos. 69 and 100].


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(i) all of the matters set forth in Federal Rule of Bankruptcy Procedure

2004(b) as related to [the Debtor]; (ii) all of the Debtor’s 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 Debtor’s

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 Plan’s 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 Debtor’s 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

Vuppalapati’s 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 Kyko’s requests.5

3 Neither Vuppalapati nor the Debtor raised any objection to the scope of the exam requested by Kyko.

4 Kyko alleges that the list of equity holders on the Debtor’s Statement of Financial Affairs is inconsistent

with other sworn statements previously provided by Vuppalapati.

5 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.


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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 Kyko’s 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, Kyko’s 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 Debtor’s President and CEO, is certainly


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the person with knowledge of the Debtor’s financial condition.6 After all, she is the individual

that declared, under penalty of perjury, that the contents of the Debtor’s bankruptcy petition and

its related filings and disclosures are true and correct. When asked directly about the scope of

Kyko’s inquiry, Vuppalapati’s 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 Debtor’s assets, liabilities, and business affairs. She is the individual who verified the

identities of the Debtor’s shareholders, which is among the information Kyko seeks from the

examination.

As the Debtor’s 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 Debtor’s filings in this case, she also is

the person most likely to possess information of the type identified in Bankruptcy Rule 2004(b).

6 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.


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D. 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 debtor’s 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 Kyko’s 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 Debtor’s 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 Vuppalapati’s role with the Debtor, this Court finds that she is the

appropriate person to testify with respect to the matters set forth in Kyko’s 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.


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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 Kyko’s

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 _____________________________________

GREGORY L. TADDONIO

UNITED STATES BANKRUTPCY JUDGE

__________________________________________________________________________________________________________________________________________________________________

GREGORY Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L.L. TADDONIO O O O O

UNITED STATES BANKRUTPCY JUDGE


FILED

CLERKU.S. BANKRUPTCYCOURT -

4/8/14 1:55 pm

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Madhavi Vuppalapati Ordered to Attend an Examination in Bankruptcy Proceedings Related to Fraud Action Commenced by Kyko Global Inc