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2024 Supreme(Online)(NCLAT) 206
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
1542/ND/2024 COMPANY APPEAL(AT)(INS)
Ex-Directors of a corporate debtor lack standing to access documents or participate in the Corporate Insolvency Resolution Process if they resigned prior to its initiation.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 - Corporate Insolvency Resolution Process - Appeals against the orders of the Adjudicating Authority rejecting applications for access to documents and approval of the Resolution Plan - Appellant, an ex-Director, claimed entitlement to information regarding the Resolution Plan and alleged undervaluation of assets - The Adjudicating Authority found that the Appellant, having resigned prior to the initiation of CIRP, lacked standing to participate or receive documents - The Resolution Plan was approved by the Committee of Creditors with a significant majority. (Paras 2, 3, 9, 19, 29)
(B) Corporate Governance - Rights of ex-Directors in CIRP - The court reiterated that ex-Directors are not entitled to participate in the CIRP if they resigned before its initiation, distinguishing their rights from those of suspended Directors. (Paras 19.2, 19.3)
(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. (Para 29)
Facts of the case:
The Appellant, a former Director of the Corporate Debtor, challenged the rejection of his applications for access to the Resolution Plan and alleged undervaluation of assets during the Corporate Insolvency Resolution Process initiated by the State Bank of India.
Findings of Court:
The Adjudicating Authority found the Appellant lacked standing to challenge the Resolution Plan as he had resigned prior to the initiation of the CIRP, and the Resolution Plan was approved by the Committee of Creditors with a 97.54% vote.
Issues: The main issues were whether the Appellant, as an ex-Director, had the right to access the Resolution Plan and whether the Adjudicating Authority erred in rejecting his applications.
Ratio Decidendi: The court ruled that the Appellant, having resigned before the CIRP, was not entitled to participate or receive documents, and the approval of the Resolution Plan by the Committee of Creditors was within their commercial wisdom.
Result: Appeals 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 allo
