2021 (2) TMI 952 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - payment / recovery of their dues such as remuneration / wages, other perquisites including terminal benefits, if any - existence of debt and dispute or not - HELD THAT - Regulation 9 of the CIRP Regulations lays down the procedure for the workmen and employees to submit their claims before the IRP. IRP / RP is then to verify and determine the amount of the claim. The workers and employees thus are operational creditors. They are not members of the CoC of the Corporate Debtor. Regulation 22 of the IP Regulations mandates that an Insolvency Professional must ensure that the confidentiality of the information relating to insolvency resolution process, liquidation or bankruptcy process is maintained at all times. The exception to this disclosure can only be made to the relevant parties as required under the CIRP Regulations or the Code or for any other law for the time being in force. Therefore, reluctance and refusal of the Respondent in sharing the copy of the Resolution Plan with the Applicants cannot be faulted. It would not be appropriate or permissible for this Authority to do anything otherwise than what is expressly provided under the Code. Section 30 of the Code provides detailed procedure for submission of the Resolution Plan to the Resolution Professional, presentation of the Plan to the CoC for its approval and approval of the Plan by the CoC by a vote of not less than 66% of the voting share after considering its feasibility and viability, the manner of distribution proposed which would take into account the order of priority among creditors as laid down in sub-section 1 of Section 53 including priority and value of the security interest of Secured Creditors. The Committee shall also examine the viability or otherwise of the Plan in terms of the conditions provided under Section 30. Upon its approval by the CoC the Resolution Plan would have to be submitted to the Adjudicating Authority for its satisfaction and approval. In view of such express provisions in relation to the Resolution Plan it is clear that the statutory mandate requires that the Resolution Plan can only be presented to the CoC for its approval and presented before the Adjudicating Authority for its satisfaction in approving the same. The Code or the Regulations there under do not contemplate presentation or supply of the Resolution Plan or a copy thereof to any other body or entity - Workmen of the Corporate Debtor who stand on a different footing than other employees under Section 53 may have a prerogative in satisfaction of their claims under Section 53, but they certainly do not have any other privilege beyond that. To say that workmen being at par with the secured creditors are also entitled to privileges of a member of CoC would be fallacious and would go against the grain of the intent and purpose of the Code. The role of the Operational Creditors in the Resolution Process is very limited and is essentially confined to the satisfaction of their claims. Taking the facts of the case at hand and the law as it stands today into consideration we are of the humble view that the Applicants cannot be found entitled to a copy of the Resolution Plan or any portion thereof. They would also not be eligible to be heard or intervene during the process of consideration of the Resolution Plan by this Authority. The payments as to their wages and gratuity and other terminal benefits shall be in accordance with the law and in terms of the Resolution Plan guided by the provisions under the Code. Application dismissed.

Summary

Issues Involved:
1. Entitlement of employees to a copy of the Resolution Plan.
2. Right of employees to participate in the hearings and proceedings related to the approval of the Resolution Plan.
3. Confidentiality of the Resolution Plan under the Insolvency and Bankruptcy Code (IBC).

Issue-Wise Detailed Analysis:

1. Entitlement of Employees to a Copy of the Resolution Plan:
The applicants, representing various employee associations of the corporate debtor, sought a full copy of the Resolution Plan approved by the Committee of Creditors (CoC). They argued that the employees, being vital stakeholders, should be aware of the plan's provisions regarding their employment and outstanding dues. The tribunal, however, noted that the Insolvency and Bankruptcy Code (IBC) and related regulations mandate the confidentiality of the Resolution Plan. The Code does not envisage sharing the Resolution Plan with operational creditors, including employees, before its approval by the Adjudicating Authority. The tribunal referenced previous judgments, including Innoventive Industries v. ICICI Bank and Mr. Anil N. Surwade v. Mr. Prashant Jain, to support this stance. It concluded that employees, being operational creditors, are not entitled to a copy of the Resolution Plan.

2. Right of Employees to Participate in Hearings and Proceedings:
The applicants also sought permission to participate in the hearings and proceedings for the approval of the Resolution Plan. They contended that as the Resolution Plan might alter their terms of service and entitlements, they should be heard in the matter. The tribunal, however, held that the Code does not provide for the participation of operational creditors in the CoC meetings or the approval process of the Resolution Plan. The tribunal cited the Swiss Ribbons v. Union of India case, emphasizing that the Code is a complete legislation and the rights of operational creditors are confined to the satisfaction of their claims. The tribunal reiterated that the involvement of employees in the insolvency resolution process is limited to their claims and entitlements, and they do not have a role in the CoC deliberations or approval process of the Resolution Plan.

3. Confidentiality of the Resolution Plan:
The tribunal underscored the importance of maintaining the confidentiality of the Resolution Plan as mandated by the IBC and related regulations. The Resolution Professional (RP) is required to ensure that the Resolution Plan is only presented to the CoC and not shared with any other parties, including operational creditors. The tribunal referenced Regulation 22 of the Insolvency Professionals (IP) Regulations and various judicial precedents to support this position. It concluded that the RP's refusal to share the Resolution Plan with the applicants was justified and in compliance with the statutory provisions.

Conclusion:
The tribunal rejected the applications filed by the employee associations, holding that they are not entitled to a copy of the Resolution Plan or to participate in the hearings and proceedings related to its approval. The tribunal emphasized the statutory mandate of confidentiality and the limited role of operational creditors in the insolvency resolution process. The applications were dismissed on contest, with no order as to costs.