In the matter of Abloom Infotech Pvt. Ltd.

National Company Law Tribunal1 August 2023

CitationI.A. 3583-ND-2023 in Company Petition No. (IB) – 2115-(ND)-2019

Ratio decidendi

The rule this decision rests on

The Tribunal holds that a shareholder of the corporate debtor has no standing under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to obtain a copy of the resolution plan during the corporate insolvency resolution process, because the Code confers no express right on shareholders to seek such a document, and shareholders are excluded from representation, participation and voting in the Committee of Creditors and speak only through the directors, the Code having curtailed shareholders' rights in favour of creditors' principles during the resolution process. Shareholders' participation in insolvency proceedings is confined to the liquidation stage, where they may claim as stakeholders and distribution follows the waterfall mechanism; they have no such entitlement during the resolution process. Once a resolution plan's order is pronounced it becomes a public document, so a shareholder who wishes to see it may apply for a certified copy of the order rather than requiring the plan to be disclosed to him in the course of the proceedings.

Written by Miss Lucy from the judgment below, not taken from a headnote.

Judgment

As delivered

IN THE NATIONAL COMPANY LAW TRIBUNALNEW DELHI COURT – VIITEM NO. 1IA: 3583/ND/2023IN CP (IB) 2115/ND/2019IN THE MATTER OF:CS Vekas Kumar Garg V/s. Mr. Praveen BansalOrder under Section U/s 60(5) of IBC, 2016.Order delivered on 01.08.2023CORAM:SHRI BACHU VENKAT BALARAM DAS,HON’BLE MEMBER (JUDICIAL)SHRI RAHUL BHATNAGAR,HON’BLE MEMBER (TECHNICAL)ORDEROrder pronounced in open Court vide separate sheets.IA 3583/ND/2023 stands dismissed.SD/- SD/-(Rahul Bhatnagar) (Bachu Venkat Balaram Das)Member Technical Member Judicial1I.A. 3583/2023(IB)– 2115/(ND)/2019THE NATIONAL COMPANY LAW TRIBUNALCOURT VI, NEW DELHII.A. 3583/ND/2023INCompany Petition No. (IB) – 2115/(ND)/2019Under Section 60(5) of the Insolvency and BankruptcyCode, 2016.IN THE MATTER OF:DMI FINANCE PVT. LTD.…. FINANCIAL CREDITORVERSUSM/S ABLOOM INFOTECH PVT. LTD.….. CORPORATE DEBTORAND IN THE MATTER OF:MR. VEKAS KUMAR GARGRP OF NINEX DEVELOPERS LIMITED.... APPLICANTVERSUSRP MR. PARVEEN BANSALRP OF M/S ABLOOM INFOTECH PVT. LTD2I.A. 3583/2023(IB)– 2115/(ND)/2019…RESPONDENTCORAM:SHRI. BACHU VENKAT BALARAM DAS, HON’BLE MEMBER(JUDICIAL)SHRI RAHUL BHATNAGAR, HON’BLE MEMBER(TECHNICAL)For the Applicant: Mr. Rakesh Kumar, Mr. Preeti Kashyap, Mr.Ankit Sharma and Mr. Harsh Vardhan Gupta,AdvsORDERPER- BACHU VENKAT BALARAM DAS, MEMBER (JUDICIAL)Order Pronounced on: 01.08.20231. This Application has been filed by RP of M/s of M/s NinexDevelopers Limited, one of the shareholders of the CorporateDebtor i.e., Abloom Infotech Private Limited under section60(5) praying for the following reliefs: -a) Pass an order to direct the Respondents to share the copyof resolution plan of the Corporate Debtorb) Issue other necessary orders in the interest of justice asthought appropriate by Hon’ble Bench.3I.A. 3583/2023(IB)– 2115/(ND)/2019

2. We have heard the Ld. Counsels for both the parties at length and have gone through the documents on record filed by both the parties. 3. The applicant is praying for the copy of the resolution plan in order to examine its due entitlement of the resolution plan proceeds in accordance with law. 4. There is no express provision in the Code in which shareholder can ask for sharing copy of Resolution Plan. It is 5. The Hon’ble NCLAT Chennai recently in the matter of Ravi Shankar Vedam vs. Tiffins Barytes Asbestos and Paints Limited and Ors. (13.06.2023 - NCLAT): MANU/NL/0581/2023 held that Legislature has curtailed the 'Rights of the Shareholders' based on the established 'Principles of Creditors' in the control framework. The Court provides the 'shareholders' right to file a 'Claim' only in the Liquidation Process as 'stakeholders' and the advances of stakeholders as stated in Regulation 2(k) includes shareholders only because unlike 'CIRP', in Liquidation, distribution to stakeholders is in accordance with the 4 I.A. 3583/2023 (IB)– 2115/(ND)/2019 waterfall mechanism. The relevant paras are reproduced as under: 18. At the outset, this Tribunal is of the earnest view that the question whether a shareholder of the Corporate Debtor has locus standi, to challenge the Resolution Plan, is to be adjudicated. In an Insolvency process, when an insolvency of Debtor is imminent, the fiduciary duty of the Directors and Managers, who are Agents of the Shareholders, shifts to the Creditors to preserve the value of the Enterprise for maximising the returns for Creditors. The Legislature in its wisdom, has curtailed the 'Rights of the Shareholders' based on the established 'Principles of Creditors' in the control framework. The Court provides the 'shareholders' right to file a 'Claim' only in the Liquidation Process as 'stakeholders' and the advances of stakeholders as stated in Regulation 2(k) includes shareholders only because unlike 'CIRP', in Liquidation, distribution to stakeholders is in accordance with the waterfall mechanism. Shareholders are excluded from representation, participation or voting in the CoC and are represented in the CoC only through the Directors and can speak only through the Directors.

6. There is no express provision in the Code that allows shareholders to request a copy of the Resolution Plan. The shareholders have a say at the time of liquidation of the 5 I.A. 3583/2023 (IB)– 2115/(ND)/2019

Corporate Debtor but not in the CIR process. The order in Resolution Plan has already been reserved, and once it is pronounced, it will become a public document, and the shareholders may apply for a Certified Copy of the Order. 7. In terms of the above, I.A. 3583/2023 stands dismissed

Let a copy of order be served to parties.

SD/- SD/- (RAHUL BHATNAGAR) (BACHU VENKAT BALARAM DAS) MEMBER (TECHNICAL) MEMBER (JUDICIAL)

6 I.A. 3583/2023 (IB)– 2115/(ND)/2019

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