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2018 (6) TMI 872 - AT - Insolvency and BankruptcyCorporate insolvency process - Whether in terms of Section 24(3)(c) of I&B Code, the Resolution Professional is required to give notice to Operational Creditors or their representatives to attend the meeting of Committee of Creditors? - Held that - Intention of the legislature is clear that the Committee of Creditors while approving or rejecting one or other resolution plan should follow such procedure which is transparent. Those who will watching the proceeding such as (suspended) Board of Directors or its Partners; Operational Creditors or its representatives and Resolution Applicant(s) are not mere spectator but may express their views to the Committee of Creditors for coming to conclusion in one or other way. For the reason aforesaid we are of the view that the Committee of Creditors should record reasons (in short) while approving or rejecting one or other resolution plan.
Issues Involved:
1. Requirement of notice to Operational Creditors for attending Committee of Creditors' meetings under Section 24(3)(c) of the Insolvency and Bankruptcy Code, 2016. 2. Legislative intent behind allowing non-voting attendees (suspended Board of Directors, Partners, Operational Creditors, and Resolution Applicants) in Committee of Creditors' meetings. Issue-wise Detailed Analysis: 1. Requirement of Notice to Operational Creditors: The core issue was whether the Resolution Professional must notify Operational Creditors or their representatives to attend the Committee of Creditors' (CoC) meetings as per Section 24(3)(c) of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The Operational Creditors, M/s Shah Brothers Ispat Pvt. Ltd. and M/s Ashok Leyland Limited, claimed they were owed substantial debts exceeding 10% of the aggregate debt but were not given notice to attend the CoC meetings. The Adjudicating Authority directed the Resolution Professional to issue a speaking order on their claim, leading to the appeal. 2. Legislative Intent Behind Non-Voting Attendees: The judgment delved into the legislative history and intent behind Section 24 of the I&B Code. Initially, the draft Insolvency Bill, 2015, did not mandate notice to Operational Creditors for CoC meetings. However, the Parliamentary Joint Committee recommended their inclusion to ensure their views/concerns are considered, even though they lack voting rights. The rationale was that Operational Creditors, while unable to assess the commercial viability of the Corporate Debtor or restructure their debts, should still present their views on important issues. Background and Legislative Deliberations: The judgment highlighted the evolution of Section 24 through the Parliamentary Joint Committee's recommendations, emphasizing the importance of Operational Creditors' presence in CoC meetings. The Committee noted that while Operational Creditors cannot decide on commercial viability or debt restructuring, their presence ensures their concerns are considered by the CoC when finalizing resolution plans. Relevant Provisions and Judicial Precedents: The judgment referenced Section 30 of the I&B Code, which allows Resolution Applicants to attend CoC meetings without voting rights. It also cited a similar case, 'Rajputana Properties Pvt. Ltd. V/s. Ultra Tech Cement Ltd.,' where it was held that the Resolution Professional cannot decide the eligibility of Resolution Applicants and must maintain confidentiality of resolution plans. Conclusion: The judgment concluded that the Resolution Professional must notify Operational Creditors if their aggregate dues exceed 10% of the debt, allowing them to attend CoC meetings. The CoC must consider views expressed by non-voting attendees, including Operational Creditors, suspended Board of Directors, and Resolution Applicants, ensuring a transparent process. The appeal was disposed of, directing the Resolution Professional to act in accordance with the decision in 'Rajputana Properties Pvt. Ltd.' Final Observations: The Committee of Creditors should record reasons for approving or rejecting resolution plans, considering views from non-voting attendees. This ensures transparency and fairness in the resolution process, aligning with the legislative intent of the I&B Code. The appeal was disposed of with these observations, emphasizing the need for procedural transparency and inclusivity in CoC meetings.
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