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2024 Supreme(Online)(NCLAT) 205
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,
Jagdish Valecha – Appellant
Versus
Anurag Kumar Sinha Resolution Professional of Valecha Engineering Limited – Respondent
1552/ND/2024 COMPANY APPEAL(AT)(INS)
Ex-Directors of a corporate debtor are not entitled to participate in the Corporate Insolvency Resolution Process or access the Resolution Plan unless classified as suspended Directors at the time of initiation.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 - Corporate Insolvency Resolution Process - Appeals filed against the Order of the Adjudicating Authority rejecting applications for access to Resolution Plan and for disclosure of documents - Appellant, an ex-Director, claimed entitlement to participate in the CIRP and access documents - The Adjudicating Authority held that the Appellant, having resigned prior to the initiation of CIRP, was not entitled to such access. (Paras 2, 5, 9, 19.2, 30)
(B) Corporate Governance - Rights of ex-Directors in CIRP - The court reiterated that ex-Directors are not entitled to participate in the CIRP unless they are classified as suspended Directors at the time of initiation. (Paras 19.2, 26)
(C) Commercial Wisdom - The court emphasized that the commercial wisdom of the Committee of Creditors in approving the Resolution Plan should not be lightly interfered with. (Paras 29, 30)
Facts of the case:
The Appellant, an ex-Director of the Corporate Debtor, challenged the rejection of his applications for access to the Resolution Plan and for disclosure of documents related to the Corporate Debtor's insolvency proceedings. The Adjudicating Authority found that the Appellant had resigned before the initiation of the Corporate Insolvency Resolution Process.
Findings of Court:
The Adjudicating Authority's rejection of the Appellant's applications was upheld, affirming that he was not entitled to participate in the CIRP or access the Resolution Plan.
Issues: The main issues were whether the Appellant, as an ex-Director, had the right to access the Resolution Plan and participate in the CIRP.
Ratio Decidendi: The court ruled that the Appellant, having resigned prior to the initiation of the CIRP, was not classified as a suspended Director and thus had no entitlement to the requested documents or participation in the process.
Result: Both Appeals are dismissed.
J U D G M E N T
ASHOK BHUSHAN, J.
These two Appeals have been filed by the Appellant challenging the Order dated 25.06.2024 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench – IV).
2. In Comp. App. (AT) (Ins.) No. 1542/2024, the Appellant has challenged the Order dated 25.06.2024 in I.A. No. 910/2024 filed by the Appellant. Appellant has also sought to challenge the Order dated 25.06.2024 passed in I.A. No. 5819/2023, i.e., Plan approval Application. In Comp. App. (AT) (Ins.) No. 1552/2024, Appellant has challenged the Order dated 25.06.2024 passed in I.A. No. 2519/2024 filed by the Appellant. The Adjudicating Authority by the Impugned Order has rejected I.A. No. 2519/2024. By the same Order dated 25.06.2024, Adjudicating Authority has allowed the I.A. No. 5819/2023 filed by the Resolution Professional (`RP’), for approval of the Resolution Plan and by the same Order, dismissed I.A. No. 910/2024 filed by the Appellant.
3. Brief facts of the case necessary to be noticed for deciding these Appeals are;
i. Appellant was Director of the Corporate Debtor M/s. Valecha Engineering Ltd. who resigned on 19.11.2019.
ii. On an Application filed by the State Bank of India (`SBI’) under Section
7 of the Insolvency and Bankruptcy Code, 2016 , (for short `The IBC’), Adjudicating Authority initiated Corporate Insolvency Resolution Process (`CIRP’) against the Corporate Debtor by Order dated 21.10.2022.
iii. Interim Resolution Professional (`IRP’) issued a public announcement on 03.11.2022. In pursuance of Notice inviting Expression of Interest (`EoI’), 6 EoIs were received, `Form-G’ was republished, 4 Resolution Plans were submitted which was placed before the Committee of Creditors (`CoC’).
iv. The Resolution Plan submitted by JK Solutions Pvt. Ltd. in consortium with One Media Facility Management was approved with 97.54% vote in the 19th Meeting of the CoC held on 30.10.2023, which concluded on 25.11.2023.
v. RP filed I.A. No. 5819/2023, praying for approval of the Resolution Plan. vi. I.A. No. 910/2024 was filed by the Appellant, ex-Promoter and ex- Director and guarantor of the Corporate Debtor.
vii. Applicant’s case in the Application was that he does not have access to any document or copies of all papers necessary pertaining to the Corporate Debtor.
viii. Applicant by the Application has sought copy of the Resolution Plan as approved by the CoC of the Corporate Debtor.
ix. RP filed the Reply to the I.A. No. 910/2024, opposing the Application stating that Appellant having resigned on 19.11.2019 is no longer the Director of the Corporate Debtor. The Appellant was not entitled either to participate in the proceedings or to receive any documents or information.
x. Another I.A. No. 2519/2024 was filed by the Appellant before the Adjudicating Authority which is referred as Fixed Deposit (`FD’) Application in which Application, Applicant pleaded that during the period April 2014 to April 2018, Corporate Debtor had submitted various FD receipts to the Officer of the Executive Engineer, Construction Division – 3, PWD Manipuri by way of Performance Guarantee. The Executive Engineer authorised the refund of the FD vide letter dated 23.11.2019. It was pleaded that RP has concealed and undervalued Assets of the Corporate Debtor.
xi. Reply was filed by RP to the Application, opposing the same pleading that no proceedings have been remitted by the SBI. RP pleaded that all facts have been placed before the CoC. Resolution Plan has been approved, which include the proposal of Successful Resolution Applicant (`SRA’) on relinquishment of their rights in favour of the Financial Creditor “pertaining to money which may be recovered by the Corporate Debtor from third-party”.
xii. RP submitted that Resolution Plan has already dealt with any receipt of money by the Corporate Debtor.
xiii. As noted above, the Adjudicating Authority has rejected the I.A. No.2519/2024, by Order dated 25.06.2024 and by a separate Order of the same day allow
