TaxTMI 
TaxTMI 
2025 (11) TMI 684
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....f 2024 filed by the suspended management of the Corporate Debtor and denied them access to the first set of two valuation reports. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant- ex-Director of the Corporate Debtor. 2. Coming to the factual background of the matter at hand, the Appellant is ex-director of the Corporate Debtor-Winsome Yarns which was admitted into Corporate Insolvency Resolution Process ("CIRP" in short) on 22.12.2023. With the commencement of the resolution process, two valuers had been appointed viz. M/s Gtech Valuers Pvt. Ltd. and M/s Value Edge Professionals Pvt. Ltd. for valuing three class of assets of the Corporate Debtor. During the 8th CoC meeting held on 28.05.2024, both valuers had presented their valuation methodology. During the 9th CoC meeting held on 06.06.2024, the valuation reports submitted by Gtech and Value Edge were found to be high-pitched by the CoC which therefore decided to appoint two new valuers-M/s Kanassure Valuation Services Pvt. Ltd. and R&A Valuation LLP to provide fresh set of valuations. The Appellant sent an e-mail on 14.06.2024 to the Respondent-Resolution Professional ("RP" in short) to....
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....rt in Vijay Kumar Jain Vs Standard and Chartered Bank in Civil Appeal No. 8430 of 2018. Assailing the impugned order, it was also contended that the Adjudicating Authority had disregarded the mandate of Sections 24(3)(b) and 24(4) of the IBC which clearly allows participation of suspended directors in the CoC meetings. 4. Rebutting the contentions raised by the Appellant, Shri Sandeep Bajaj, Ld. Counsel representing the Respondent-RP submitted that the Adjudicating Authority had correctly dismissed the IA No. 1935 of 2024 after taking notice of the fact that the relevant valuation reports which had been relied upon by the CoC alongwith the resolution plans had already been shared with the Appellant. It was asserted that when the reports of the first two valuers had not been approved by the CoC, it had become redundant and did not constitute part of the records of the ongoing CIRP. The CoC having decided to scrap the first set of valuation reports, the suspended management cannot claim entitlement to access such documents. Further the notice and agenda of the 9th CoC meeting did not mention that valuation reports were slated for discussion and hence the valuation reports of the f....
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....egulations with regard to the role of RP and CoC in the conduct of the resolution process and meetings of the CoC including dealing with valuation process and related reports. Section 24: Meeting of committee of creditors. 24. (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 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 Board of Directors or the partners of the corporate persons, as the case may be; (c) operational creditors or their representatives if the amount of their aggregate dues is not less than ten per cent. of the debt. (4) The directors, partners and one representative of operational creditors, as referred to in sub-section (3), may attend the meetings of committee of creditors, but shall not have any righ....
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....eventh day from the insolvency commencement date, appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35. (2) The interim resolution professional or the resolution professional, as the case may be, may appoint any professional, in addition to registered valuers under sub-regulation (1), to assist him in discharge of his duties in conduct of the corporate insolvency resolution process, if he is of the opinion that the services of such professional are required and such services are not available with the corporate debtor. (3) xxxx (4) xxxx Regulation 35: Fair value and Liquidation value. 35. (1) Fair value and liquidation value shall be determined in the following manner:- (a) the two registered valuers appointed under regulation 27 shall submit to the resolution professional an estimate of the fair value and of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor; Provided that the resolution professional sh....
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....violated the statutory right of the Appellant by failing to provide access to the valuation reports though the same was discussed during the 9th CoC meeting. Per contra, it is the contention of the RP that the valuation reports of the first set of valuers was not part of the agenda for the 9th CoC meeting and hence was not circulated to any member of the CoC. 10. For a better appreciation of the issue, we may now look at the notice and agenda of the 9th CoC meeting to examine whether the valuation reports of the first two valuers were reflected as part of the agenda item for discussion in the 9th CoC meeting. The notice of the 9th CoC meeting dated 03.06.2024 has been placed on record by the Respondent by way of an additional affidavit as may be seen at page 17-18 therein. This notice dated 07.06.2024 notified that the 9th CoC meeting would be held on 06.06.2024 and also appended the agenda and notes for the meeting. The agenda for the 9th CoC meeting as enclosed with meeting notice is placed at page 20 of the additional affidavit which is as reproduced below: AGENDA FOR THE MEETING Item No. Particulars A. LIST OF MATTERS TO BE DISCUSSED/NOTED: 1. The Resolutio....
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....rised the members of the COC that the Registered Valuers Entities have submitted their valuation Reports on 06.06.2024 and the same has been sent to the COC members who have submitted the Confidentiality Undertaking to obtain the same. Further, the undersigned requested the representative of Indian Overseas Bank to provide the signed and stamped Confidentiality Undertaking as the same is pending from their Bank only. The representative of IOB assured to provide the same at the earliest. Thereafter, the representative of IOB and Mr. Manish Bagrodia (Director, power of Board suspended) were requested to excuse from the meeting for sometime and wait in the waiting room so that valuation reports can be presented and discussed. They excused themselves from the meeting. The undersigned thereafter presented the Valuation Reports. It was discussed that the valuation of Building seems to be hypothetical and exorbitant and does not seem to be realizable. The representative of EARC suggested that the RP may discuss the methodology adopted in conducting the valuation with both the RVEs and that the valuers may provide justification of the said valuation. To this, the representative of....
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..... The representative of Indian Overseas Bank inspite of being a Financial Creditor was also asked to excuse himself from the meeting as he had not submitted the confidentiality undertaking. Similarly, the Appellant was also requested to excuse himself from the meeting so that the valuation reports could be presented and discussed. This is therefore clearly not a case where the RP had been arbitrary or selectively discriminatory in not sharing the valuation report with the Appellant during the 9th CoC meeting. 14. We also find that the issue of participatory rights was admittedly raised by the Appellant with the Respondent-RP. The RP had also sent their clarificatory response thereto. The e-mail of the RP dated 20.06.2024 is as extracted below: Thu, Jun 20, 2024 at 6:25 PM To: Manish B <[email protected]> Cc: Anil Kohli <[email protected]>, Insolvency <[email protected]> Dear Sir, This is in reference to the trailing email regarding sharing of valuation reports. It is apprised that in consonance with Regulation 35 of IBBI (Resolution Process for Corporate Persons) Regulations, 2016, the Resolution Professional shall provide the fair a....
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....clarified in the reply email that discussion on the resolution plans were also carried out during the same 9th CoC meeting in which the Appellant had participated. The RP had also clearly assured the Appellant that he would be included in all deliberations of the CoC as permissible under the IBC. We thus find that the RP had allowed the Appellant to participate in the 9th CoC meeting on other agenda items as well as assured them of continued participation in future CoC meetings. We therefore do not find any instance of RP having precluded or blocked the Appellant from participation in crucial discussions relating to valuation and resolution plans. 16. Given this backdrop, the Adjudicating Authority did not commit any mistake in holding that the right to participate of the Appellant under Section 24 of the IBC did not extend to deliberations over documents which are statutorily restricted and confidential in nature. In making this observation, the Adjudicating Authority at para 14 of the impugned order has also relied on the judgment of this Tribunal in Arabinda Kumar Rath judgment supra wherein it has been held that the RP is not obligated to share valuation reports containing c....
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....r Section 25(2)(i). It cannot be gainsaid that operational creditors, who may participate in such meetings but have no right to vote, are vitally interested in such resolution plans, and must be furnished copies of such plans beforehand if they are to participate effectively in the meeting of the committee of creditors. This is for the reason that under Section 30(2)(b), repayment of their debts is an important part of the resolution plan qua them on which they must comment. So the first important thing to notice is that even though persons such as operational creditors have no right to vote but are only participants in meetings of the committee of creditors, yet, they would certainly have a right to be given a copy of the resolution plans before such meetings are held so that they may effectively comment on the same to safeguard their interest. 13. It is also important to note that every participant is entitled to a notice of every meeting of the committee of creditors. Such notice of meeting must contain an agenda of the meeting, together with the copies of all documents relevant for matters to be discussed and the issues to be voted upon at the meeting vide Regulation 2....
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....uperfluous, the logic behind insisting on document which had become redundant and irrelevant does not appeal to reason. 21. This brings us to the findings of the Adjudicating Authority which has held that the Appellant had no legal right under the IBC or the CIRP Regulations to demand valuation reports which were not under the consideration of the CoC. The Adjudicating Authority had observed that the CoC in the 9th meeting had duly deliberated on the first set of valuation reports and had thereafter rejected the same on the ground that the methodology adopted was replacement cost basis which was not practical as it did not reflect the true realisable/liquidation value. The CoC had thereafter resolved to obtain fresh valuations. The Adjudicating Authority has held that with the fresh valuation reports which was relied upon by the CoC having already been shared with the Appellant, there is no ground for any relief to be given to the Appellant. The relevant paragraphs of the impugned order are as reproduced below: 15. In the present case, the initial valuation report was expressly rejected by the Committee of Creditors (CoC) owing to concerns regarding its reliability and ....