2021 (4) TMI 396 - AT - Insolvency and Bankruptcy

Appellate Tribunal Overturns RP's Actions, Orders Compliance with Insolvency Laws

Amit Suresh Bhatnagar Versus Bhuvan Madan RP for Diamond Power Infrastructure Ltd.

The Appellate Tribunal found that the Resolution Professional (RP) had contravened multiple mandatory provisions of the Insolvency and Bankruptcy Code and ... Validity of action of the Resolution Professional (RP) - Section 24 and 25 (2) of the Insolvency and Bankruptcy Code - direction to Resolution Professional to call the Suspended Management in Committee of Creditors (CoC) meeting after giving the Agenda and to supply/provide the copy of Resolution Plan issued by the RP before taking any decisions of the Resolution Plan whether being accepted or not - restraint on RP from acting on the Resolution Plans - without affording opportunity to the ex-directors of the Corporate Debtor, 9th 10th and 11thCoC meetings were convened and Resolution of Liquidation of Corporate Debtor has been passed - principles of natural justice. HELD THAT:- In the present case, there were two directors of the Corporate Debtor, Appellant Amit Suresh Bhatnagar and Sumit Suresh Bhatnagar. The RP was required to give notice of each and every meeting of CoC to both the exdirectors. There is nothing on record to show that RP has served notice of any meetings of CoC on ex-director Sumit Suresh Bhatnagar. The RP has not offered any explanation as to why the notice has not been served on Sumit Suresh Bhatnagar ex-director of Corporate Debtor - it is clear that on false ground RP has declined to share video conference link to the Appellant. Admittedly, the RP has not provided the copy of Resolution Plans to the Appellant. Thus, he has contravened the mandatory provision provided in Regulation 21(3) (iii) of the IBBI Regulations - It is pertinent to note that the 11th CoC meeting convened on 08.11.2019 at 03:00 PM and notice of that meeting was sent to the Appellant on 07.11.2019 at 08:15 PM i.e. less than 24 hours’ notice was served, which is against the Regulation 19 of IBBI Regulations. Without affording opportunity to the ex-directors of the Corporate Debtor, 9th 10th and 11thCoC meetings were convened and Resolution of Liquidation of Corporate Debtor has been passed. Which is in contravention to Section 24 (3) (b) of I&B Code and Regulations 19(1), 21 (3) (iii) and 23 of the IBBI Regulations. Thus, the RP has failed to perform the duties of Resolution Professional as provided under Section 25 of the I&B Code - it is apparent that there has been material irregularity in exercising of powers by the RP during the Corporate Insolvency Resolution Period. Therefore, the Impugned order as well as the Resolution Passed in 9th 10th and 11thCoC meetings are not sustainable in law. Hence, they are hereby set aside. The Respondent (RP) is directed to provide all the documents relevant to the matters including Resolution Plans to suspended directors (Appellant and Sumit Suresh Bhatnagar) of the Corporate Debtor and the meetings of CoC called by giving not less than five days’ notice in writing to every participants and they shall provide an option to attend the meetings even through video conferencing - Appeal allowed. Issues Involved:1. Notice of CoC meetings to members of the suspended board of directors.2. Provision of a minimum five days’ notice to participants.3. Provision of relevant documents to participants.4. Option to attend CoC meetings through video conferencing.Issue-Wise Detailed Analysis:1. Notice of CoC Meetings to Members of the Suspended Board of Directors:The Appellant argued that the Resolution Professional (RP) failed to give notice of CoC meetings to all members of the suspended board of directors, as mandated by Section 24(3)(b) of the Insolvency and Bankruptcy Code (I&B Code). The RP admitted that the Appellant, Amit Suresh Bhatnagar, was not given notice for the 9th CoC meeting on 10.10.2019, despite the Gujarat High Court's order on 20.09.2019 permitting his attendance. Additionally, the RP did not serve any notice to the other ex-director, Sumit Suresh Bhatnagar, for any CoC meetings. This contravened the mandatory provisions of Section 24(3)(b) of the I&B Code.2. Provision of a Minimum Five Days’ Notice to Participants:The Appellant received notice for the 10th CoC meeting scheduled on 05.11.2019 only on 04.11.2019 at 03:18 PM, and for the 11th CoC meeting on 08.11.2019 only on 07.11.2019 at 08:15 PM, both of which provided less than 24 hours' notice. Regulation 19 of the IBBI Regulations mandates a minimum of five days' notice for CoC meetings. The RP's failure to comply with this regulation was evident.3. Provision of Relevant Documents to Participants:The Appellant contended that the RP did not provide copies of the Resolution Plans, despite specific requests via email dated 30.10.2019. Regulation 21(3)(iii) of the IBBI Regulations requires that all documents relevant to matters to be discussed in CoC meetings, including resolution plans, be provided to participants. The RP's failure to provide these documents was in direct contravention of the regulation and the Supreme Court's judgment in Vijay Kumar Jain v. Standard Chartered Bank and Ors.4. Option to Attend CoC Meetings through Video Conferencing:The Appellant requested to attend the 10th CoC meeting via video conferencing, which was refused by the RP without a valid explanation, despite having obtained a legal opinion supporting the Appellant's right to attend via video conferencing. Regulation 23 of the IBBI Regulations mandates that the notice convening CoC meetings must provide participants with an option to attend via video conferencing. The RP's refusal to provide this option was a clear violation of the regulation.Conclusion:The Appellate Tribunal found that the RP had contravened multiple mandatory provisions of the I&B Code and IBBI Regulations, including failing to serve proper notice, provide relevant documents, and offer video conferencing options. Consequently, the Tribunal set aside the impugned order and the resolutions passed in the 9th, 10th, and 11th CoC meetings. The RP was directed to comply with the statutory requirements and provide all necessary documents and notices to the suspended directors, ensuring their right to attend CoC meetings through video conferencing. The appeal was allowed, and no costs were imposed.