Tribunal issues directions to RP on valuation, COC meeting, and Director participation in insolvency case

The Tribunal disposed of the case with specific directions to the Resolution Professional (RP). The RP was instructed to re-determine the liquidation value using the first two valuations, convene a Committee of Creditors (COC) meeting to reconsider Resolution Plans, and allow suspended Directors to participate in COC meetings. Additionally, 30 days were excluded from the Corporate Insolvency Resolution Process (CIRP) period for compliance.

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Issues Involved:
1. Approval of the Resolution Plan under Section 30(6) and Section 31 of the Insolvency and Bankruptcy Code, 2016.
2. Objections to the valuation process and liquidation value determination.
3. Participation rights of the suspended Board of Directors in the Committee of Creditors (COC) meetings.
4. Constitution of the COC and related party claims.
5. Compliance with procedural regulations and transparency in the Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan:
The Resolution Professional (RP) filed IA 125 of 2018 seeking approval of the Resolution Plan submitted by Maharashtra Seamless Limited (MSL), which was approved by the Committee of Creditors (COC) with 86% voting share. However, Indian Bank, a financial creditor, dissented and voted for another Resolution Applicant, Area Projects Consultants Private Limited. The RP contended that the Resolution Plan meets all legal requirements and has been approved by the majority of the COC, considering its feasibility and viability.

2. Objections to the Valuation Process and Liquidation Value Determination:
The RP initially appointed two registered valuers, but due to discrepancies in their reports, a third valuer was appointed. Indian Bank and the suspended Director objected to this third valuation, arguing it was unnecessary and not in accordance with Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Tribunal found that the third valuation was not justified as it was sought without comparing the first two valuations, which is a deviation from Regulation 35. The Tribunal directed the RP to re-determine the liquidation value by considering the first two valuations.

3. Participation Rights of the Suspended Board of Directors:
The suspended Director argued that he was not allowed to participate in the COC meetings, particularly the 8th meeting where the Resolution Plan was approved. The Tribunal noted that the RP's notice directed the suspended Board members to excuse themselves from the entire meeting, which violated Section 24(3)(b) of the Code. The Tribunal emphasized that the Directors are entitled to attend meetings, express their views, and offer suggestions, though they do not have voting rights. The Tribunal directed the RP to allow the suspended Directors to participate in future COC meetings and record their views and suggestions.

4. Constitution of the COC and Related Party Claims:
The suspended Director contended that the COC was not properly constituted, particularly questioning the inclusion of DB International (Asia) Limited. The Tribunal referred to a previous order in IA 123 of 2018, which concluded that there was no corporate guarantee given by UMWH to DB International (Asia) Limited. Therefore, the Tribunal did not entertain this objection again, as it had already been decided.

5. Compliance with Procedural Regulations and Transparency in CIRP:
The Tribunal found that the RP did not adhere to Regulation 35 when appointing the third valuer and determining the liquidation value. The RP was directed to re-determine the liquidation value by considering the first two valuations. The Tribunal also noted that the RP should have allowed the suspended Directors to attend and participate in the COC meetings, as per Section 24(3)(b) of the Code. The Tribunal emphasized the need for transparency and compliance with procedural regulations throughout the CIRP.

Conclusion:
The Tribunal disposed of IA 125 of 2018 and IA 282 of 2018 with specific directions to the RP. The RP was instructed to re-determine the liquidation value using the first two valuations, convene a COC meeting to reconsider the Resolution Plans in light of the revised liquidation value, and allow the suspended Directors to participate and express their views in the COC meetings. Additionally, 30 days were excluded from the CIRP period to complete these directions.

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