2023 (4) TMI 832 - AT - Insolvency and Bankruptcy

CIRP - Service of notice when admitted claim of Operational Creditors is 10% - Whether is it not mandatory on the part of the RP to issue notice to all the Operational Creditors in terms of Section 24(3)(c) of I B Code if it is found by him that their admitted claim is more than 10%? - HELD THAT - Section 24 deals with the meeting of committee of creditors. Section 24(1) provides that the members of the CoC may meet in person or by such electronic means as may be specified. Section 24(2) provides that all the meetings of the CoC shall be conducted by the RP. Section 24(3) provides that the RP shall give notice of each meeting of the CoC including the authorised representatives, members of suspended board of director and or partners of the Corporate Persons and Operational Creditors or their representatives if the amount aggregated is not less than 10% of the debt. A bare reading of the provision i.e. Section 24(3)(c) shows that it is mandatory in nature and it is incumbent upon the RP to serve notice to all the Operational Creditors of each meeting of the CoC or if they elect their authorised representatives after notice is received by them, then the notice of meeting to the authorised representatives. There is no question of otherwise knowledge acquired of the meetings of the CoC by the Operational Creditors as has been argued by Counsel for Respondent No. 1. It is also true that in view of Section 24(4) the Operational Creditor or their representatives shall not have a right to vote in each meeting of the CoC in which they participate and in case they remain absent despite notice then they cannot rake up a dispute for getting the proceeding invalidated on that account. It is held that it is incumbent upon the RP to serve notice of each meeting of the CoC to the Operational Creditors or their representatives if the amount of the aggregated due is not less than 10% of the debt. Since, in this case, it is found that no notice was given by the RP to the Operational Creditors, therefore, it is a dereliction of duty on his part for which he deserves to be burdened with costs. The cost is assessed at Rs. 1 Lakh which shall be paid by the RP to the Operational Creditors (Appellants), who are three members, in equal proportion, by way of bank draft within a period of 30 days from the date of receipt of the certified copy of this order. Looking at the fact that amount involved is too meagre to set aside the resolution plan which has been approved by the CoC by not less than 96.38% voting share, we do not find it to be a fit case for setting aside the resolution plan much less the order dated 19.09.2022 - Appeal disposed off.

Summary

Issues Involved:
1. Compliance with Section 24(3)(c) and Section 24(4) of the Insolvency and Bankruptcy Code (IBC).
2. Validity of the approved resolution plan.
3. Dereliction of duty by the Resolution Professional (RP).

Summary:

Issue 1: Compliance with Section 24(3)(c) and Section 24(4) of the IBC
The appellants, who are Operational Creditors, argued that the RP failed to comply with Section 24(3)(c) of the IBC by not issuing notice to them for meetings of the Committee of Creditors (CoC), despite their claims exceeding 10% of the total debt. The Tribunal acknowledged that Section 24(3)(c) mandates the RP to give notice of each CoC meeting to Operational Creditors if their aggregate dues are not less than 10% of the debt. The Tribunal emphasized that the provision is mandatory and non-compliance constitutes a dereliction of duty by the RP.

Issue 2: Validity of the Approved Resolution Plan
Despite the non-compliance with Section 24(3)(c), the Tribunal decided not to set aside the resolution plan, which was approved by a 96.38% voting share of the CoC. The Tribunal noted that the Operational Creditors, even if present in the meetings, would not have had the right to vote as per Section 24(4) of the IBC. The Tribunal also considered the appellants' claim that they might have received an additional 1-2% of the amount, which was deemed too meager to invalidate the resolution plan.

Issue 3: Dereliction of Duty by the RP
The Tribunal found that the RP's failure to issue notices to the Operational Creditors constituted a dereliction of duty. Consequently, the RP was ordered to pay costs of Rs. 1 Lakh to the appellants in equal proportion within 30 days.

Conclusion:
The appeal was disposed of with the Tribunal affirming the resolution plan approved by the CoC, while also penalizing the RP for non-compliance with mandatory notice provisions under Section 24(3)(c) of the IBC.