2018 (8) TMI 2151 - AT - Insolvency and Bankruptcy

Committee of Creditors not required to share resolution plans with suspended Board under IBBI Regulations 19 and 21

The NCLAT held that the Committee of Creditors is not required to provide resolution plans to the suspended Board of Directors for their comments under ... Approval of Resolution Plan - Committee of Creditors have not provided (suspended) Board of Directors with the copies of the resolution plans for their comments - Regulations 19 and 21 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- 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 - 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 financial matrix of one or other 'resolution plan' by majority share of voting rights. 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. It is not required to grant relief as sought for - appeal disposed off. Issues:1. Grievance regarding Committee of Creditors not providing copies of resolution plans to the Board of Directors for comments.2. Whether resolution plans should be disclosed to Board of Directors, Operational Creditors, or other resolution applicants attending the meeting.Analysis:1. The appeal raised concerns about the Committee of Creditors not providing the Board of Directors with copies of resolution plans for their comments, citing Regulations 19 and 21 of the Insolvency & Bankruptcy Board of India Regulations, 2016. The appellant argued that as per Section 31 of the I & B Code, approved resolution plans are binding on stakeholders, necessitating the Committee to share the plans with the Board of Directors.2. The respondent contended that resolution plans are confidential documents and should not be disclosed to the Board of Directors, Operational Creditors, or other resolution applicants. The Tribunal examined Section 24 of the I & B Code, which mandates the resolution professional to notify the Board of Directors of Committee of Creditors meetings. The Tribunal referred to previous judgments emphasizing the role of the Board of Directors in negotiations and decision-making processes.3. The Tribunal highlighted that while the Board of Directors can attend meetings where resolution plans are discussed, the confidential nature of these plans restricts their distribution to non-voting participants like the Board of Directors, Operational Creditors, and resolution applicants. The Tribunal reiterated that resolution plans are confidential and should not be shared with competitors or other stakeholders attending the meeting.4. The Regulations governing notice for Committee meetings require the resolution professional to provide relevant documents for discussion and voting. The Tribunal clarified that while matters like resolution plans should be discussed, sharing them with non-voting participants is not required. The Board of Directors' involvement is crucial in negotiations but does not extend to decision-making on the viability or restructuring of debt.5. Ultimately, the Tribunal declined to grant the relief sought by the appellant, emphasizing the expertise of the Committee of Creditors in assessing resolution plans and making decisions. The decision was made in line with the confidentiality of resolution plans and the specific roles assigned to different stakeholders in the insolvency resolution process.This detailed analysis of the judgment addresses the issues raised in the appeal and provides a comprehensive understanding of the Tribunal's decision regarding the disclosure of resolution plans to various stakeholders involved in the insolvency resolution process.