The NCLAT upheld the denial of access to the Resolution Plan for a resigned director in the context of corporate insolvency proceedings.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) reviewed a bunch of two appeals and observed that an individual who has resigned from the board of a corporate debtor prior to the initiation of the Corporate Insolvency Resolution Process is not entitled to receive the Resolution Plan or participate in proceedings, as they do not qualify as a suspended director under the Insolvency and Bankruptcy Code, 2016. This reinforces that the rights to access information are limited to current participants in the resolution process.
In the case before the National Company Law Appellate Tribunal (NCLAT), two appeals were filed by the Appellant challenging the Order dated June 25, 2024, issued by the Adjudicating Authority of the National Company Law Tribunal, Mumbai Bench – IV. The first appeal, Comp. App. (AT) (Ins.) No. 1542/2024, contested the Order regarding I.A. No. 910/2024 and also addressed the Order related to I.A. No. 5819/2023 concerning the approval of a Resolution Plan. The second appeal, Comp. App. (AT) (Ins.) No. 1552/2024, specifically challenged the Order that rejected I.A. No. 2519/2024. The Adjudicating Authority dismissed the latter application while approving the Resolution Plan and rejecting I.A. No. 910/2024.
The background indicated that the Appellant had served as a Director of Valecha Engineering Ltd. and had resigned on November 19, 2019. The Corporate Insolvency Resolution Process (CIRP) was initiated on October 21, 2022, following a petition by the State Bank of India under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). A public announcement was made on November 3, 2022, leading to the submission and approval of various Resolution Plans by the Committee of Creditors (CoC). The Appellant filed I.A. No. 910/2024, claiming a lack of access to necessary documents, including the approved Resolution Plan. The Resolution Professional contended that the Appellant, having resigned before the initiation of the CIRP, was not entitled to participate in the proceedings or receive related documents.
The Adjudicating Authority ruled against the Appellant in both applications, asserting that the claims were without merit and that all relevant financial recoveries had been adequately addressed in the approved Resolution Plan. During the hearing of the Appeals, arguments centred on the Appellant's entitlement to information and the accuracy of asset valuations, referencing precedents from the Supreme Court concerning the rights of ex-Directors in such matters.
In its judgment, the NCLAT examined the provisions of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, particularly Regulation 21, which outlined the necessary contents of meeting notices. It confirmed that the notice must include details about the meeting, options for participation, and relevant documents. The Tribunal referenced the Supreme Court's ruling in Vijay Kumar Jain, which affirmed that suspended Board members are entitled to copies of Resolution Plans, emphasizing that the term "documents" encompasses such plans.
Despite this, the NCLAT determined that the Appellant was not entitled to these documents, as the resignation occurred more than two years prior to the CIRP initiation, and the Appellant did not qualify as a suspended director. The Tribunal concluded that the Adjudicating Authority correctly dismissed the Appellant's application for access to the Resolution Plan. Ultimately, the NCLAT upheld the Adjudicating Authority's decision, noting that the approval of the Resolution Plan by the CoC, which received a 97.54% vote share, warranted no interference. Consequently, both appeals were dismissed without any order as to costs.
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines Press Release and more.
Click on the Citation/Link to access these resources
留言