2022 (7) TMI 463 - Tri - Insolvency and Bankruptcy

Production of records/documents - Whether the Liquidator is mandated under the Code to share a copy of the valuation report with the Applicant being an ex-director, shareholder, guarantor of the corporate debtor and member of stakeholders' consultation committee? - HELD THAT - The Member of Stakeholders' Consultation Committee(SCC) shall have access to all relevant records and information as may be required to provide advice to Liquidator on matters relating to the sale, fixing of reserve price etc. For advising on matters of sale and fixing the reserve price of assets of the corporate debtor, the critical record is their valuation reports. It is not easy to contemplate how without any access to valuation reports, the SCC Member can effectively advise the Liquidator on matters of sale as envisaged under Section 31-A(1). Denying the member of the SCC access to the valuation reports and other relevant documents will only defeat the very object for which the provisions have been framed. This Bench holds that to enable a Member of Stakeholders Consultation Committee to meet the mandate under Regulations 31-A(1) and as laid down in 31-A(5), the copy of the valuation report needs to be shared with the applicant i.e. Member of Stakeholders Consultation Committee, as the same would be crucial in determining the reserve price of the asset of the corporate debtor. Regarding confidentiality of the document, the Liquidator can take an undertaking from the applicant to maintain the same as per his powers under Regulation 7(2)(h) of Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, read with paragraph 21 of First Schedule thereto. This could be in the form of a non-disclosure agreement in which Liquidator could be indemnified in case information was not kept strictly confidential. Application allowed.

Summary

Issues involved:
1. Whether the Liquidator is mandated to share a copy of the valuation report with an ex-director, shareholder, guarantor of the corporate debtor, and member of the stakeholders' consultation committee.

Detailed Analysis:
The judgment pertains to an application filed under Section 60(5) of the IBC, 2016, where the applicant, a Suspended Director of a company, sought a copy of valuation reports from the Liquidator. The applicant challenged the mode and manner of sale of the company's assets, alleging undervaluation and seeking a fresh valuation. The Liquidator was directed to conduct a fresh valuation by the Adjudicating Authority. However, the applicant was not provided with a copy of the valuation report, leading to the current dispute.

The key issue before the Tribunal was whether the Liquidator is obligated to share the valuation report with the applicant, who is a member of the Stakeholders' Consultation Committee (SCC) and entitled to access relevant records under Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016. The respondent argued that the applicant lacked the standing to challenge valuations and that the purpose of valuation reports is settled by legal precedent. The respondent contended that the applicant's participation in the SCC precludes questioning the reserve price subsequently.

The Tribunal extensively analyzed the relevant regulations and legal precedents cited by both parties. It emphasized that SCC members must have access to valuation reports to effectively advise the Liquidator on sale-related matters, including fixing reserve prices. Referring to the principle of purposive interpretation of statutes, the Tribunal highlighted the need to promote the legislative objective. It cited a decision by a Coordinate Bench of NCLT, Ahmedabad, supporting the sharing of valuation reports with ex-directors for a fair evaluation of corporate assets.

The Tribunal distinguished the cases cited by the respondent, noting that they did not align with the facts of the present case. It emphasized the importance of maximizing value in insolvency resolution and concluded that denying the applicant access to valuation reports would defeat the purpose of the regulations. Therefore, the Tribunal ruled in favor of the applicant, directing the Liquidator to share the valuation report while ensuring confidentiality through appropriate undertakings.

In conclusion, the Tribunal allowed the application, emphasizing the necessity of sharing valuation reports with SCC members to fulfill their advisory role effectively. The judgment balanced the interests of transparency and confidentiality by outlining measures for safeguarding sensitive information while enabling stakeholders to contribute meaningfully to the liquidation process.