Vijay Kumar Jain vs Standard Chartered Bank Ltd. & Ors

For Appellant : Mr. Amit Sibal, Senior Advocate assisted by Mr. Arvind Kumar Gupta, Advocate

For 3rd Respondent : Mr. Nakul Sachdeva, Advocate for (CoC)

For 4th Respondent: Mr. Ramji Srinivasan, Senior Advocate assisted by Mr. Raunak Dhillon, Mr. Karan Khanna and Ms. Ananya Dhar Choudhury, Advocates (R.P.)

ORDER

09.08.2018 This appeal has been preferred by Director of 'Ruchi Soya

Industries Limited ('Corporate Debtor') with the grievance that the 'Committee of

Creditors' have not provided (suspended) Board of Directors with the copies of

the 'resolution plans' for their comments. Reliance has been placed on

Regulations 19 and 21 of the Insolvency & Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016.

2. It is submitted that the approved 'resolution plans' is binding in nature

on the members (shareholders) and other stakeholders in terms of Section 31 of

the I&B Code, therefore, it was the duty on the part of the 'Committee of 2

Creditors' to provide the 'resolution plans' to the members of the (suspended)

Board of Directors.

3. Mr. Ramji Srinivasan, learned Senior Counsel appearing on behalf of the

respondent opposed the prayer and submitted that the 'resolution plans' are

confidential document and cannot be disclosed or provide to any person

including the members of (suspended) Board of Directors or the 'Operational

Creditor' or other 'resolution applicant'.

4. We have heard learned counsel for the parties and perused the record.

Section 24 of the I&B Code relates to meeting of 'Committee of Creditors'.

In terms of clause (b) of sub-section(3) of Section 24 the 'resolution professional'

is required to give notice of each meeting of the 'Committee of Creditors' to the

members of the (suspended) 'Board of Directors' or the 'partners of the corporate

persons', as the case may be.

5. The aforesaid provision fell for consideration before this Appellate Tribunal

in "M/s. ANG Industries Ltd. vs. Shah Brothers Ispat Pvt. Ltd. & Anr. in

Company Appeal (AT) (Insolvency) No. 109 of 2018" wherein by judgment dated

24th May, 2018, while disposed of the matter the Appellate Tribunal noticed the

report of the 'Joint Parliamentary Committee', gist of which has been reflected at

paragraph 8, as quoted below:

"8. From the report of 'Joint Parliamentary Committee'

following fact emerges:-

Company Appeal (AT) (Insolvency) No. 442 of 2018 3

(a) The committee had been composed of members

of creditors (financial) who have capability to

assess the commercial viability of the

'Corporate Debtor' and who are willing to

modify the terms of debt contract in negotiation

between the creditors and the 'Corporate

Debtor'. The Committee of Creditors can modify

the terms of debt contract only by negotiation

between the creditors and the 'Corporate

Debtor' that means 'Board of Directors'. That is

the reason that the 'Board of Directors' have

been also allowed to attend the meeting though

they have no voting right.

(b) 'Operational Creditors' are not able to decide

the commercial viability of the 'Corporate

Debtor' nor they can take risk of restructuring

their debt in order to make the 'Corporate

Debtor' a going concern.

However, as the 'Operational Creditors' have

right to trigger Corporate Insolvency Resolution

Process (u/s 9) the Committee was of the view

that their presence is also required to 'present

their views/concerns' on important issues.

Company Appeal (AT) (Insolvency) No. 442 of 2018 4

(c) According to the 'Joint Parliamentary

Committee' the important issues and the

views/concerns as may be raised by those who

are present are required to be taken into

account by the Committee of Creditors while

finalizing the resolution plans."

6. The aforesaid provisions have also been noticed by this Appellate Tribunal

in "Rajputana Properties Pvt. Ltd. vs. Ultra Tech Cement Ltd. & Ors. in I.A.

No. 594 of 2018 in Company Appeal (At)(Insolvency) No. 188 of 2018" on 15the

May, 2018 while disposing of I.A. In the said case this Appellate Tribunal

observed as follows:

9. As per Section 30(2), the Resolution Professional is

required to examine whether resolution plan

confirm the provisions as mentioned therein but he

cannot disclose it to any other person including

Resolution Applicant(s), who has submitted the

resolution plan. According to us, the resolution

plan submitted by one or other Resolution

Applicant being confidential cannot be disclosed to

any competitor Resolution Applicant nor any

opinion can be taken or objection can be called for

Company Appeal (AT) (Insolvency) No. 442 of 2018 5

from other Resolution Applicants with regard to

one or other resolution plan.

11. From Section 24(3) it is clear that the Resolution

Professional is not only required to give notice of

the meeting to 'the members of Committee of

Creditors' but also to the members of (suspended)

Board of Directors or partners of the corporate

person as the case may be. The 'Operational

Creditors' or their representatives are also to be

informed to attend the meeting of Committee of

Creditors, if the amount of the aggregate dues is

not less than ten per cent of the debt. Section 24(4)

shows that the Directors, Partners,

Representatives of Operational Creditors may

attend the meeting of Committee of Creditors but

have no right to vote in such meeting. The meeting

of the Committee of Creditors is required to be

conducted in such a manner as may be specified

by the Board.

12. As per Section 30(5), the Resolution Applicants can

attend the meeting of Committee of Creditors in

which the resolution plans of the Resolution

Applicants are considered.

Company Appeal (AT) (Insolvency) No. 442 of 2018 6

13. If Section 24 is read with Section 30, it is clear that

the following persons are to take part in the

meeting of Committee of Creditors at the time of

approval of one or other resolution plan.

(a) members of Committee of Creditors;

(b) members of the (suspended) Board of

Directors or the Partners of the corporate

persons;

(c) Operational Creditors or their

representatives if the amount of their

aggregate dues is not less than ten per cent

of the debt [Clause (a), (b), (c) of Section

24(3)]; and

(d) Resolution Applicant(s) when resolution plan

of such applicant(s) are placed for

consideration [Section 30(5)].

14. The members of the 'Committee of Creditors' have

voting right but others who attend the meeting as

noticed above including the Board of Directors,

Partners, Operational Creditor(s) and the

Resolution Applicant(s) have no voting right."

Company Appeal (AT) (Insolvency) No. 442 of 2018 7

7. From the aforesaid provisions, it is clear that though the (suspended)

Board of Directors have been allowed to attend the meeting in which their

'resolution plans' are considered, this Appellate Tribunal did not allow the

'resolution plan' to be handed over to the (suspended) Board of Director or to the

'Operational Creditor' or to other competitors 'resolution applicants' who will

attend the meeting. On the other hand, this Appellate Tribunal held that the

'resolution plans' being confidential it cannot be handed over to any other person

including the competitor 'resolution applicants'.

8. Regulation 19 relates to 'notice for meeting of the committee', which is as

follow:

"19 Notice for meetings of the committee -

1. Subject to this Regulation, a meeting of the

committee shall be called by giving not less than

seven days' notice in writing to every participant, at

the address it has provided to the resolution

professional and such notice may be sent by hand

delivery, or by post but in any event, be served

on every participant by electronic means in

accordance with Regulation 20.

(2) The committee may reduce the notice period

from seven days to such other period of not less

than twenty four hours, as it deems fit."

Company Appeal (AT) (Insolvency) No. 442 of 2018 8

9. The contents of the notice for meeting has been provided in Regulation 21,

which includes the venue of meeting, time and date of meeting etc. Clause (3) of

Regulation 21 stipulates the matter to be contained an agenda of the meeting

and the document which are required to be discussed and the issues to be voted

upon in the meeting, reads as follows:

"21 Contents of the notice for meeting -

(3) The notice of the meeting shall -

(a) contain an agenda of the meeting with

the following -

(i) a list of the matters to be discussed at

the meeting;

(ii) a list of the issues to be voted upon at

the meeting; and

(iii) copies of all documents relevant to the

matters to be discussed and the issues to

be voted upon at the meeting; and

(b) state that a vote of the members of the

committee shall not be taken at the

meeting unless all members are present

at such meeting."

Company Appeal (AT) (Insolvency) No. 442 of 2018 9

From the aforesaid provisions, it is clear that the 'resolution

professional' in its notice required to provide copies of all documents relevant to

the matters to be discussed and issues to be voted upon at meeting.

10. According to the learned counsel for the appellant list of matter which

should be discussed includes the 'resolution plans' submitted by one or another

'resolution applicants'. However, inclusion of issues for discussion does not

mean that all the 'resolution plans' are to be forwarded along with the notice to

the Board of Directors or to the other participants, including the competitors and

'resolution applicants' whoever will also not attend the meeting. The 'Board of

Directors' or Representative of 'Operational Creditors' or the 'Resolution

Applicants' having no voting right, it is not required to be forwarded to them,

though they may act in terms of decision in "Rajputana Properties Pvt. Ltd.

(Supra)".

11. From the report of the Joint Parliamentary Committee it is clear that the

'Committee of Creditors' can modify the terms of 'debt' contract only by

negotiations between the 'creditors' and the 'corporate debtor' i.e. the 'Board of

Directors'. Therefore, for the purpose for modifications/terms of 'contract'

between the 'creditors' and 'corporate debtor', the 'Board of Directors' are to be

taken into confidence.

12. The Board of Directors cannot decide the viability and feasibility of a

'Resolution Plan' nor is competent to restructure their debt in order to make the

'Corporate Debtor' as a going concern. It only in the domain of the 'committee

of creditors' who are expert in the field to decide the viability, feasibility and

Company Appeal (AT) (Insolvency) No. 442 of 2018 10

financial matrix of one or other 'resolution plan' by majority share of voting

rights.

13. However, if the 'Committee of Creditors' are still negotiating the matter

with the 'resolution applicants' in such case the representative of the Board of

Director may give its suggestions.

14. For the reasons aforesaid, we do not inclined to grant relief as sought for.

The appeal is disposed with the observations aforesaid. No cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

/ns/uk/

Company Appeal (AT) (Insolvency) No. 442 of 2018