Summary
Members of the suspended board, though not voting members of the committee of creditors, were entitled to resolution plans and relevant documents with meeting notices so that participation was meaningful. Confidentiality could be secured by undertakings and indemnified nondisclosure agreements. The Court ordered supply of plans and fresh CoC deliberation with the appellants participating, excluding the time spent in these proceedings from the resolution period.
Issues
- Whether suspended-board participants were entitled to copies of resolution plans before CoC meetings.
- Whether confidentiality or the distinction between committee members and participants defeated that right.
Provisions considered
- Sections 24(3)(b), 24(4) and 25(2)(i), Insolvency and Bankruptcy Code, 2016Suspended-board members could attend and discuss plans at each meeting without voting rights; meaningful participation required advance access. (¶¶ 7–9, 13–15)
- Regulations 21(3)(iii) and 24(2)(e), IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016Documents relevant to meeting discussions included resolution plans and were to accompany notices to participants. (¶¶ 7, 13–14)
- Sections 31(1), 60(5)(c) and 61(1), Insolvency and Bankruptcy Code, 2016Directors, often guarantors bound or affected by a plan, had a vital interest and could approach the adjudicating authority and, as aggrieved persons, the appellate tribunal. (¶¶ 7, 12)
- Regulation 7(2)(h), read with First Schedule paragraph 21, IBBI (Insolvency Professionals) Regulations, 2016Confidentiality could be preserved through undertakings, including a nondisclosure agreement indemnifying the resolution professional for breach. (¶¶ 7, 15)
Held
- The distinction between committee membership and nonvoting participation did not permit withholding plans from suspended-board members. The plans were documents relevant to matters discussed, and access was essential to effective participation. (¶¶ 8–9, 13–15)
- Notes on Clauses were an interpretive aid but did not support restricting directors to a one-way role as information providers. The statutory scheme recognised their interest, including as guarantors whose obligations might be affected by the plan. (¶ 10–12)
- The regulations implemented rather than exceeded the Code. Confidentiality concerns could be met by undertakings and appropriate nondisclosure terms instead of denying access. (¶ 15)
- The related-party financial-creditor exclusion in the proviso to Section 21(2) did not concern directors merely as directors; the respondents’ contrary inference did not defeat the document right. (¶ 16)
- Plans were to be supplied within two weeks and a CoC meeting convened within two weeks thereafter with the appellants participating. The CoC was to deliberate afresh and approve with the requisite majority or reject, then follow the statutory process. Time spent in these proceedings was excluded from the resolution period. (¶ 18)
Result
Petition and appeal allowed; NCLAT judgment set aside. Directions issued for supply of all plans submitted to the CoC, fresh deliberation with the appellants as participants and exclusion of time spent in these proceedings.