2019 (6) TMI 675 - HC - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - petitioner alleged that the CIRP process has not been carried out in accordance with the Insolvency Bankruptcy Code 2016, as the erstwhile Board of Directors (BoD) have not been provided with all the documents including all resolution plans, liquidation value report, fair value report, report on section 29A etc, which are relevant to the matters to be discussed by the Committee of Creditors (CoC) - HELD THAT - The issue raised by the present petitioner for providing all aforesaid documents and thereafter to convene a meeting of the CoC afresh to deliberate and consider the suggestions and objections of the erstwhile Board of Directors before passing any Resolution Plan (including CA No.286 of 2019) (P-19) will be treated as a preliminary issue. The preliminary issue will be decided by the Adjudicating Authority before considering other Applications or before approval of any Resolution Plan. In deciding the said preliminary issue, Adjudicating Authority will be guided by the judgment in Vijay Kumar Jain's case 2019 (2) TMI 97 - SUPREME COURT and shall not take into consideration any other past practice, procedure, directions, judgments or orders of Adjudicating Authority/NCLAT which are in contravention, contradiction or derogation of the directions of the Hon''ble Supreme Court in the matter of Vijay Kumar Jain's case (supra). Any judgment and order passed by the Adjudicating Authority on the aforesaid preliminary issue is directed to be kept inoperative for two weeks enabling the affected parties to exercise their appellate remedies in accordance with law.

Issues:
1. Non-supply of relevant documents to the erstwhile Board of Directors during the Corporate Insolvency Resolution Process (CIRP).
2. Allegation of the CIRP process being vitiated due to lack of access to essential documents.
3. Petitioner's contention regarding the approval of a Revised Consolidation Resolution Plan without providing necessary documents.
4. Concern over the general practice of not providing resolution plans and documents to Directors during the CIRP process.
5. Application for quashing the CIRP process and restarting it.
6. Reference to recent judgments by the Hon'ble Supreme Court emphasizing strict adherence to prescribed procedures in insolvency cases.
7. Decision by the High Court regarding the issues raised by the petitioner.

Analysis:
1. The primary issue in this case revolves around the non-supply of crucial documents to the erstwhile Board of Directors during the CIRP of the Corporate Debtor. The petitioner alleged that the lack of access to documents such as resolution plans, fair value reports, and reports on section 29A hindered their effective participation in the CIRP process, thus vitiating the entire process.

2. The petitioner heavily relied on the directions given by the Hon'ble Supreme Court in a previous judgment, emphasizing the importance of providing relevant documents to Directors and ensuring their participation in the Committee of Creditors (CoC) meetings. The petitioner contended that the failure to provide necessary documents impeded their ability to contribute meaningfully to the CIRP proceedings.

3. Another significant aspect of the case was the approval of a Revised Consolidation Resolution Plan without providing the Board of Directors access to the plan during the CIRP process. The petitioner raised concerns about the fairness of the process, especially when essential documents were not made available for scrutiny and input.

4. The petitioner highlighted a broader concern regarding the prevalent practice of withholding resolution plans and other essential documents from Directors during the CIRP of various companies. This practice was viewed as detrimental to the transparency and integrity of the insolvency resolution process.

5. Seeking redress, the petitioner filed an application to quash the ongoing CIRP process and requested a fresh start, citing the lack of access to critical documents as a fundamental flaw in the proceedings.

6. The petitioner also referenced recent judgments by the Hon'ble Supreme Court emphasizing strict adherence to legal procedures in insolvency cases, underscoring the importance of following the law diligently in such matters.

7. In its decision, the High Court acknowledged the issues raised by the petitioner and issued specific directions. The Court treated the provision of necessary documents to the erstwhile Board of Directors as a preliminary issue to be decided by the Adjudicating Authority. The judgment emphasized adherence to the Supreme Court's directives and allowed affected parties to pursue appellate remedies within a specified timeframe. Other issues arising from the insolvency process were left open for determination by the appropriate legal authorities.

By addressing the concerns raised by the petitioner and providing clear directives based on legal principles, the High Court ensured a fair and transparent resolution of the issues surrounding the CIRP process in this case.

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