TaxTMI 
TaxTMI 
2024 (1) TMI 44
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....of Committee of Creditors (in short 'CoC') has been allowed and direction has been issued to the Appellant herein to deliver a copy of the Information Memorandum as also other documents considered in the meeting of CoC to the Respondent, irrespective of the fact that the Respondent is a participant in the CoC. 2. At the time of preliminary hearing held on 19.05.2023, the following order was passed : - "Learned Counsel for the Appellant submits that the Adjudicating Authority by the impugned order has directed that Operational Creditor be given Information Memorandum whereas under Regulation 26(4) of CIRP Regulations, 2016 the Information Memorandum can be shared only with the Members of Committee of Creditors whereas Operational Creditor is only participant and not a Member. It is submitted that the Judgement of the Hon'ble Supreme Court which has been relied on by the Adjudicating Authority was a case where Hon'ble Supreme Court has held that former directors are entitled for copy of the Resolution Plan as well as the Operational Creditor which judgment was distinguishable in the facts of the present case. 2. Submissions need scrutiny. Issue notice to the Respondent through ....
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.... Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares 3[or completion of such transactions as may be prescribed], prior to the insolvency commencement date." 8. He has submitted that the CoC has to be essentially comprised of all the financial creditors of the Corporate Debtor and the Operational Creditor is not the member. He further refer to Section 24 of the Code which deals with the meeting of CoC which is reproduced as under:- "(1) The members of the committee of creditors may meet in person or by such electronic means as may be specified. (2) All meetings of the committee of creditors shall be conducted by the resolution professional. (3) The resolution professional shall give notice of each meeting of the committee of creditors to- (a) members of 1[committee of creditors, including the authorised representatives referred to in sub-sections (6) and (6A) of section 21 and sub-section (5)]; (b) members of the suspended Boa....
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.... committee of creditors established under Section 21 and 2(l) which provides for the definition of the 'participant' which means a person entitled to attend a meeting of the committee under Section 24 or any other person authorised by the committee to attend the meeting. He further referred to Regulation 18 which is a part of Chapter VI and deals with the meeting of the committee. Regulation 18(2) provides that RP may convene a meeting if he considers it necessary, on a request received from members of the committee and shall convene a meeting if the request is made by members of the committee representing at least thirty-three per cent of the voting rights. According to the Appellant, the quorum of the meeting is provided in Regulation 22 which also says that a meeting of the committee shall quorate if members of the committee representing at least thirty-three per cent of the voting rights are present either in person or by video conferencing or other audio and visual means. 10. The sum and substance of the argument is thus that everywhere the word member has been used either in the Code or Regulations. He has argued that the Adjudicating Authority has passed the order for provi....
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....ast two financial years and provisional financial statements for the current financial year made up to a date not earlier than fourteen days from the date of the application; (d) a list of creditors containing the names of creditors, the amounts claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims; (e) particulars of a debt due from or to the corporate debtor with respect to related parties; (f) details of guarantees that have been given in relation to the debts of the corporate debtor by other persons, specifying which of the guarantors is a related party; (g) the names and addresses of the members or partners holding at least one per cent stake in the corporate debtor along with the size of stake; (h) details of all material litigation and an ongoing investigation or proceeding initiated by Government and statutory authorities; (i) the number of workers and employees and liabilities of the corporate debtor towards them; (j) 48[***] (k) 49[***] (l) other information, which the resolution professional deems relevant to the committee. (3) A member of the committee may request the resolution profe....
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....it does not mean that information memorandum and other documents cannot be supplied to the Respondent. In this regard, he has drawn our attention to Regulation 21 which provides for the contents of the notice for the meeting. Regulation 21 is reproduced as under:- "21. Contents of the notice for meeting. (1) The notice shall inform the participants of the venue, the time and date of the meeting and of the option available to them to participate through video conferencing or other audio and visual means, and shall also provide all the necessary information to enable participation through video conferencing or other audio and visual means. (2) The notice of the meeting shall provide that a participant may attend and vote in the meeting either in person or through an authorised representative: Provided that such participant shall inform the resolution professional, in advance of the meeting, of the identity of the authorised representative who will attend and vote at the meeting on its behalf. [(3) The notice of the meeting shall contain 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....
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....ion professional shall ensure that minutes are made in relation to each meeting of the committee and such minutes shall disclose the particulars of the participants who attended the meeting in person, through video conferencing, or other audio and visual means. (7) The resolution professional shall circulate the minutes of the meeting to all participants by electronic means within forty eight hours of the said meeting." 17. It is submitted that the agenda has to be given with all relevant material for the meeting. He has specifically referred to Regulation 24(2)(e) to contend that the meeting cannot be convened without supplying agenda with all the relevant material for the said meeting. 18. However, he has been candid enough to concede that he is a participant not a member and also conceded that participant has been defined in Regulation 2(l). However, he strongly relied upon the decision of the Hon'ble Supreme Court in the case of Vijay Kumar Jain (Supra) and referred to Para 9, 13 and 15 which are reproduced as under:- "9. This statutory scheme, therefore, makes it clear that though the erstwhile Board of Directors are not members of the committee of creditors, yet, they....
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....o maintain confidentiality. The source of this power is Regulation 7(2)(h) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, read with paragraph 21 of the First Schedule thereto. This can be in the form of a non-disclosure agreement in which the resolution professional can be indemnified in case information is not kept strictly confidential." 19. In rebuttal, Counsel for the Appellant has submitted that the Regulations referred to by the Respondent are only in regard to the procedure of holding the meeting and has nothing to do with the substantive provision of supply of information memorandum to the Operational Creditor or the participant. He has also submitted that the decision in the case of Vijay Kumar Jain (Supra) is entirely in its own facts and has nothing to do with the information memorandum. In this regard, he has referred to Para 12 of the said judgment which is reproduced as under:- "12. There is no doubt whatsoever that Notes on Clauses are an important aid to the construction of Sections of the Code as they show what the Drafting Committee had in mind when such provisions were drafted. However, a closer look at the Notes....
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....ulations, a resolution plan may provide for satisfaction or modification of any security interest. Security interest is defined by Section 3(31) of the Code as follows: "3. Definitions.-In this Code, unless the context otherwise requires,- xxx xxx xxx (31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee; xxx xxx xxx" This would certainly include a guarantor who may be a member of the erstwhile Board of Directors. Further, under Regulation 37(1)(f), a resolution plan may provide for reduction in the amount payable to the creditors, which again vitally impacts the rights of a guarantor. Last but not least, a resolution plan which has been approved or rejected by an order of the Adjudicating Authority, has to be sent to "participants" which would include members of the erstwhile Bo....