NCLAT Delhi: An Operational Creditor Who Is A Participant In Meetings Of CoC Has No Right To Seek A Copy Of Information Memorandum.
The National Company Law Appellate Tribunal (“NCLAT”), Delhi Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and Mr Naresh Salecha (Technical Member) has allowed an appeal and set aside an order of National Company Law Tribunal (“NCLT”) observing that the operational creditor who is a participant in meetings of the Committee of Creditors (“CoC”) has no right...
The National Company Law Appellate Tribunal (“NCLAT”), Delhi Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and Mr Naresh Salecha (Technical Member) has allowed an appeal and set aside an order of National Company Law Tribunal (“NCLT”) observing that the operational creditor who is a participant in meetings of the Committee of Creditors (“CoC”) has no right to seek a copy of the Information Memorandum.
Background Facts
On 18.10.2022, NCLT admitted an application filed by the financial creditor i.e., Tulsi Nandan Kant Bansal against M/s P.G. Advertising Pvt. Ltd. (“Corporate Debtor”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) for initiation of Corporate Resolution Insolvency Process (“CIRP’).
Following this, the moratorium was imposed and Vinay Kumar Singhal was appointed as Interim Resolution Professional (“IRP”).
During the pendency of the CIRP proceedings, Mahesh Bajaj (“Respondent”) i.e, Operational Creditor of the Corporate Debtor, filed an application for issuance of directions to the Resolution Professional of the Corporate Debtor (“Appellant”) to provide Information Memorandum and other relevant documents to him as he is a participant of CoC.
On 03.05.2023, NCLT instructed the Appellant to deliver a copy of the Information Memorandum as well as other documents considered in the meeting of CoC to the Respondent, irrespective of the fact that the Respondent is merely a participant and not a member of CoC. Aggrieved by the order, the Appellant filed an appeal in NCLAT.
Issue
Whether copy of the Information Memorandum can be ordered to be given to the Respondent (Operational Creditor) who is merely a participant in the CoC and not a member?
The Appellant argued that the CoC is comprised of all the financial creditors of the Corporate Debtor and the Operational Creditors are not the members. The Appellant referred to Section 24(4) of IBC which provides that the Operational Creditor or their representative may have a right to attend the meeting but do not have a right to vote in such meeting.
The Appellant further referred to Section 24(8) of the IBC to contend that the meeting of the CoC must be conducted in the specified manner. The Appellant further referred to Regulation 2(d) and 2(l) of CIRP Regulations, 2016 (“CIRP Regulations”) which defines ‘committee’ as a committee of creditors established under Section 21 and 2(l) and ‘participant’ as a person entitled to attend a meeting of the committee under Section 24 of IBC.
The Appellant further argued that as per Regulation 36(4) of CIRP Regulations, the Resolution Professional must share the Information Memorandum with the members of the committee. The Appellant pointed out that there is no provision either in the IBC or Regulations for giving Information Memorandum to the participants in the meeting of the CoC, therefore NCLT has committed an error in passing the order on the ground that there is no such prohibition.
Contentions of Respondent
The Respondent opposed the submissions and argued that there was no error in the order of NCLT.
The Respondent pointed out that as per Regulation 21(2) and (3)(iii) of the CIRP Regulations it is essential to supply copies of all the documents which are relevant for the matter to be discussed and issues to be voted upon at the meetings. The Respondent further referred to Regulation 24(2)(e) of the CIRP Regulations to contend that the meeting cannot be convened without supplying an agenda with all the relevant material for the said meeting.
The NCLAT allowed the appeal and set aside the order of NCLT and held that the Operational Creditor being a participant in the meeting of the CoC has no right to seek a copy of the Information Memorandum.
NCLAT observed that both IBC and the Regulations are totally silent about the supply of the Information Memorandum to the participant. The legislature, however, 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. Therefore, a copy of the Information Memorandum need not be given to the Operational Creditor who is merely a participant of the CoC and not a member.
Case Title: Vinay Kumar Singhal RP for PG Advertising Pvt. Ltd. Vs. Mahesh Bajaj
Case No.: Comp. App. (AT) (Ins) No. 645 of 2023
Counsel For Appellants: Mr Abhishek Anand, Mr Karan Kohli, Mr Sajal Jain, Lubhanshe Rai, Advocates.
Counsel For Respondent: Mr Harish Taneja, Mr Aman Raj Singh, Advocates