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2024 (1) TMI 44
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....rational Creditor being a participant 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 n....
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.... right of representation, participation or voting in a meeting of the committee of creditors: 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 rep....
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....at the manner has been specified in the Regulations and in this regard, he has now referred to Regulation 2(d) and 2(l) which deals with the definition of 'committee' which means a 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....
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.... cost of acquisition, remaining useful life, identification number, depreciation charged, book value, and any other relevant details.] (b) the latest annual financial statements; (c) audited financial statements of the corporate debtor for the last 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 au....
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....spondent has vehemently argued that there is no error in the impugned order which calls for any interference by this Tribunal. It is further submitted that though the definition of member is conspicuous by its absence in both the Code and the Regulations and the definition of participant has been given only in Regulations but 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 sha....
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....equired quorum is present throughout the meeting. (5) From the commencement of the meeting till its conclusion, no person other than the participants and any other person whose presence is required by the resolution professional shall be allowed access to the place where meeting is held or to the video conferencing or other audio and visual facility, without the permission of the resolution professional. (6) The resolution 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 conce....
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....bers of the Board of Directors, must be rejected. Equally, the Regulations, far from going beyond the Code, flesh out the true intention of the Code that is achieved by reading the plain language of the Sections that have already been adverted to. So far as confidential information is concerned, it is clear that the resolution professional can take an undertaking from members of the erstwhile Board of Directors, as has been taken in the facts of the present case, to 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 deci....
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....e Regulations also make it clear that these persons are vitally interested in resolution plans as they affect them. Thus, under Regulation 36 of the CIRP Regulations, the information memorandum that is given to each member of the CoC and to any potential resolution applicant, will contain details of guarantees that have been given in relation to the debts of the corporate debtor (see Regulation 36(2)(f) of the CIRP Regulations). Also, under Regulation 37(d) of the CIRP Regulations, 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....
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....to the participant, it has to be inferred that the legislature has made a provision for providing a copy of the information memorandum to the member of the CoC and the Resolution Applicant but not to the participant of the meeting of the CoC such like the present Respondent. Therefore, the finding recorded by the Adjudicating Authority that since there is no prohibition in the Code or the Regulations for providing the information memorandum to the Operational Creditor as a participant is totally erroneous and unsustainable. 24. In so far as, the decision of the Hon'ble Supreme Court is concerned, we will first refer to the facts of the said case. In that case, the Appellant was the member of the suspended board of director. He was aggrieved because he was not given the copy of the resolution plan and was denied even participation in the meeting of the CoC. In this background, the Hon'ble Supreme Court has held, in Para 9 of the Judgment, that in view of Section 30(2)(b) of the Code since repayment of debts is an important part, therefore, the resolution plan has to be given to the participant of the CoC. In para 13 of the said Judgment, it has been held that the expression "docu....