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2018 (9) TMI 1222 - Tri - Insolvency and BankruptcyDisallowing the representatives of the Corporate Debtor including the applicant to participate in the CoC meetings - Held that - What appears to us is that this applicant/Director wants to delay these proceedings by projecting this as violation to the rights of this applicant. Assuming violation of provision has happened, then also the Applicant has to show not only violation of some provision of law but also to show that such violation will adversely affect the interest of him. Here, he has not shown any averment reflecting that violation of some provision will adversely affect the interest of him. After examining the orders passed by Hon ble NCLAT, we are of the view that Hon ble NCLAT has not given any direction in those two cases that resolution plan has to be provided to the suspended directors, in fact, the Hon ble NCLAT has said that when it is a confidential information it need not be parted with the other contending resolution applicants. This indicates that if the information is confidential, COC could keep it to itself to maximise the valuation of the assets. If these kind of applications are entertained, it is difficult for the RPs as well as COC to complete the process within the time lines given under the Code. Notwithstanding the timelines, since we have not found any merit in this application moved by the suspended director, this application is disposed of with the directions below. This Application is hereby disposed of giving liberty to this applicant to attend the COC meetings but not to insist upon the COC or the Resolution Professional to provide information which is considered as confidential by the Resolution Professional or the COC.
Issues Involved:
1. Right of the suspended director to participate in Committee of Creditors (CoC) meetings. 2. Right of the suspended director to receive documents and information presented at CoC meetings. 3. Confidentiality of resolution plans and other sensitive information. Issue-wise Detailed Analysis: 1. Right of the Suspended Director to Participate in CoC Meetings: The applicant, a suspended director of the Corporate Debtor, sought an order to set aside the decision of the CoC that disallowed his participation in CoC meetings. He argued that under Section 24 of the Insolvency and Bankruptcy Code (IBC), 2016, and Regulation 19 of the Insolvency and Bankruptcy Board of India (IBBI) (CIRP) Regulations, 2016, he has a statutory right to attend CoC meetings. The Tribunal noted that the applicant had been allowed to attend CoC meetings per an interim order dated 11.6.2018, which permitted him to place his views before the CoC. The Tribunal confirmed that Section 24(3) of the IBC mandates that suspended directors must receive notice of CoC meetings, and they may attend but not vote. The Tribunal upheld the applicant's right to participate in CoC meetings. 2. Right of the Suspended Director to Receive Documents and Information: The applicant contended that he should receive all documents and information presented at CoC meetings, including minutes of meetings, documents provided to CoC members, resolution plans, and liquidation and fair value reports. He cited Regulation 21 of the CIRP Regulations, which states that participants should receive all documents relevant to matters discussed and voted upon in CoC meetings. However, the Tribunal differentiated between "participants" and "members" of the CoC, noting that while participants, including suspended directors, are entitled to certain documents to enable their participation, this does not extend to all confidential information. The Tribunal emphasized that Regulation 35 limits the sharing of fair and liquidation values to CoC members only, and Regulation 39 specifies that resolution plans are to be submitted to the CoC, not participants. 3. Confidentiality of Resolution Plans and Other Sensitive Information: The applicant argued that since he had signed a non-disclosure agreement, he should be granted access to all confidential information, including resolution plans. The Tribunal, however, highlighted that the confidentiality provisions in Regulation 35 are designed to protect sensitive information and maximize asset value for creditors. The Tribunal noted that the applicant did not demonstrate how the lack of access to this information would adversely affect his interests, especially given the substantial debt exposure and low liquidation value of the company. The Tribunal concluded that the CoC and the Resolution Professional (RP) are not obligated to share confidential information with suspended directors, as this could jeopardize the interests of the creditors. Conclusion: The Tribunal dismissed the application, allowing the suspended director to attend CoC meetings but not to insist on receiving confidential information. The order dated 11.6.2018, which allowed the applicant to participate in CoC meetings, was vacated. The Tribunal stressed that the primary objective of the IBC is to maximize asset value for creditors, and unnecessary delays caused by such applications could hinder this goal.
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