2024 (1) TMI 44 - AT - Insolvency and Bankruptcy

CIRP - Interpretation of statute - right of Operational Creditor to seek a copy of the information memorandum - Operational Creditor is merely a participant in the CoC and not a member. HELD THAT - The Respondent has admitted that he is only a participant. It is also an admitted fact that there is no definition of member provided in the Code or the Regulations which has been repeatedly used in the Code as well as Regulations. Section 21 deals with the composition of CoC and Section 21(2) provides that member shall be the financial creditors of the Corporate Debtor. Section 25 is in regard to the preparation of information memorandum. Section 29(2) says that the information memorandum has to be provided to the resolution applicant whereas Regulation 36 provides that it has to be given to each of the member of the committee and Regulation 36(4) provides that it shall be given to the resolution applicant. From the aforesaid two provisions and the fact that the Code and Regulations are totally silent about the supply of the information memorandum to the participant, it has to be inferred that the legislature has made a provision for providing a copy of the information memorandum to the member of the CoC and the Resolution Applicant but not to the participant of the meeting of the CoC such like the present Respondent. Therefore, the finding recorded by the Adjudicating Authority that since there is no prohibition in the Code or the Regulations for providing the information memorandum to the Operational Creditor as a participant is totally erroneous and unsustainable. In so far as, the decision of the Hon ble Supreme Court in Vijay Kumar Jain 2019 (2) TMI 97 - SUPREME COURT is concerned, reference firstly is made to the facts of the said case. In that case, the Appellant was the member of the suspended board of director. He was aggrieved because he was not given the copy of the resolution plan and was denied even participation in the meeting of the CoC. In this background, the Hon ble Supreme Court has held, in Para 9 of the Judgment, that in view of Section 30(2)(b) of the Code since repayment of debts is an important part, therefore, the resolution plan has to be given to the participant of the CoC - As far as Para 12 of the said judgment is concerned, it talks about the information memorandum which is to be given to the resolution applicant so that he may submit the resolution plan in terms of Section 30 of the Code and the CoC get the information memorandum so that they can assess the financial position of the Corporate Debtor before the meeting. There is no reasonable nexus attached with the supply of information memorandum to the participant such like the Operational Creditor - In such circumstances, the judgment in the case of Vijay Kumar Jain which is on its own facts has wrongly been relied upon by the Adjudicating Authority while passing the impugned order. The question framed in the beginning is hereby answered to the effect that the Operational Creditor being a participant in the meeting of the CoC has no right to seek a copy of the information memorandum. There are merit in the appeal, the same is hereby allowed and the impugned order is set aside.

Summary

Issues Involved:
1. Whether the Operational Creditor, being a participant in the Committee of Creditors (CoC), has the right to seek a copy of the Information Memorandum (IM).
2. Interpretation of the terms "member" and "participant" under the Insolvency and Bankruptcy Code, 2016 (Code) and related Regulations.
3. Applicability of the Supreme Court judgment in Vijay Kumar Jain Vs. Standard Chartered Bank & Ors. to the present case.

Summary:

Issue 1: Right of Operational Creditor to Seek Information Memorandum:
The primary issue was whether an Operational Creditor, who is a participant but not a member of the CoC, can be provided with the Information Memorandum. The Tribunal concluded that the Code and Regulations explicitly provide the IM to members of the CoC and resolution applicants, but not to participants. Therefore, the Adjudicating Authority's order to provide the IM to the Operational Creditor was deemed erroneous and unsustainable.

Issue 2: Interpretation of "Member" and "Participant":
The Tribunal examined the definitions and roles of "member" and "participant" under the Code and Regulations. It was noted that Section 21 of the Code specifies that the CoC comprises financial creditors of the Corporate Debtor, and Section 29(2) along with Regulation 36 mandates providing the IM to members of the CoC and resolution applicants. The absence of any provision for supplying the IM to participants, such as Operational Creditors, indicated that the legislature did not intend for participants to receive the IM.

Issue 3: Applicability of Supreme Court Judgment:
The Tribunal analyzed the Supreme Court's decision in Vijay Kumar Jain Vs. Standard Chartered Bank & Ors., which dealt with the supply of resolution plans to participants of the CoC, including erstwhile directors. The Tribunal distinguished this case, noting that the Supreme Court's judgment focused on resolution plans and not the Information Memorandum. The Tribunal emphasized that the IM, being a unique document, is not covered under the term "documents" to be provided to participants in the CoC meetings.

Conclusion:
The Tribunal concluded that the Operational Creditor, as a participant in the CoC meetings, does not have the right to seek a copy of the Information Memorandum. The appeal was allowed, and the impugned order was set aside. No costs were awarded.