Operational creditors cannot obtain copies of information memoranda as CoC participants under Section 29(2)

The NCLAT Principal Bench held that operational creditors, being mere participants and not members of the Committee of Creditors (CoC), have no right to obtain copies of information memoranda. The tribunal distinguished between members (financial creditors under Section 21(2)) and participants, noting that the Code and Regulations specifically provide for information memoranda to be supplied only to CoC members and resolution applicants under Section 29(2) and Regulation 36. The NCLAT found the lower court's reasoning erroneous and set aside the order, clarifying that legislative silence regarding participants indicates intentional exclusion from receiving such documents.

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Issues Involved:
1. Whether the Operational Creditor, being a participant in the Committee of Creditors (CoC), has the right to seek a copy of the Information Memorandum (IM).
2. Interpretation of the terms "member" and "participant" under the Insolvency and Bankruptcy Code, 2016 (Code) and related Regulations.
3. Applicability of the Supreme Court judgment in Vijay Kumar Jain Vs. Standard Chartered Bank & Ors. to the present case.

Summary:

Issue 1: Right of Operational Creditor to Seek Information Memorandum:
The primary issue was whether an Operational Creditor, who is a participant but not a member of the CoC, can be provided with the Information Memorandum. The Tribunal concluded that the Code and Regulations explicitly provide the IM to members of the CoC and resolution applicants, but not to participants. Therefore, the Adjudicating Authority's order to provide the IM to the Operational Creditor was deemed erroneous and unsustainable.

Issue 2: Interpretation of "Member" and "Participant":
The Tribunal examined the definitions and roles of "member" and "participant" under the Code and Regulations. It was noted that Section 21 of the Code specifies that the CoC comprises financial creditors of the Corporate Debtor, and Section 29(2) along with Regulation 36 mandates providing the IM to members of the CoC and resolution applicants. The absence of any provision for supplying the IM to participants, such as Operational Creditors, indicated that the legislature did not intend for participants to receive the IM.

Issue 3: Applicability of Supreme Court Judgment:
The Tribunal analyzed the Supreme Court's decision in Vijay Kumar Jain Vs. Standard Chartered Bank & Ors., which dealt with the supply of resolution plans to participants of the CoC, including erstwhile directors. The Tribunal distinguished this case, noting that the Supreme Court's judgment focused on resolution plans and not the Information Memorandum. The Tribunal emphasized that the IM, being a unique document, is not covered under the term "documents" to be provided to participants in the CoC meetings.

Conclusion:
The Tribunal concluded that the Operational Creditor, as a participant in the CoC meetings, does not have the right to seek a copy of the Information Memorandum. The appeal was allowed, and the impugned order was set aside. No costs were awarded.

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