Tribunal Upholds Confidentiality and Fairness in CIRP, Denies Suspended Directors Unrestricted Access to Resolution Plans
In a significant ruling, the Mumbai Bench of the National Company Law Tribunal (NCLT) dismissed an application filed by Mr. Abhay Narhar Kadam, challenging the conduct of the Corporate Insolvency Resolution Process (CIRP) of Megi Agro Chem Limited. The application sought to defer the approval of the resolution plan submitted by the third respondent and demanded access to various documents, including the resolution plan and valuation reports.
The case, which involved allegations of procedural irregularities and non-compliance with the Insolvency and Bankruptcy Code (IBC), 2016, was decided by a bench comprising Sh. Mohan Prasad Tiwari and Sh. Charanjeet Singh Gulati. The tribunal held that the confidentiality and integrity of the resolution process must be maintained, particularly when the suspended directors or their associates are potential resolution applicants.
The applicant, Mr. Kadam, argued that the resolution professional, Respondent No. 1, failed to provide necessary documents and violated statutory provisions, thus compromising the transparency of the process. However, the tribunal found that notices and minutes of meetings were duly circulated, and the applicant's participation in multiple meetings of the Committee of Creditors (CoC) was established.
The tribunal emphasized that while suspended directors have the right to attend CoC meetings and receive certain information, this does not extend to unrestricted access to resolution plans, especially when they are potential competitors in the process. Citing the Supreme Court's ruling in Vijay Kumar Jain v. Standard Chartered Bank, the tribunal underscored that such entitlements must be balanced against the need to preserve the sanctity of the insolvency process.
Regarding the allegations of eligibility violations under Section 29A of the IBC, the tribunal noted that the applicant failed to demonstrate any disqualifying nexus between the resolution applicant and the alleged wilful defaulter. The tribunal also upheld the confidentiality of valuation reports, stating that their disclosure could compromise the resolution process.
In its detailed order, the tribunal concluded that the applicant did not establish any material irregularity or illegality in the CIRP that would warrant intervention. The application was dismissed, and all pending applications were disposed of without costs.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Suspended directors' right to information does not extend to unfettered access to the resolution plan when they or their associates are potential or competing resolution applicants - Confidentiality and fairness of the insolvency process must be maintained.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 24, 29A, 60(5), and CIRP Regulations 19, 21, 36A.
