TMI Blog2022 (4) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... on valuation of properties of corporate debtor. The corporate debtor is the body of Ex-management and they were in control and handling the same till CIRP initiation. It would be pre-judicial if they are not even allowed to view the valuation and point out the shortfalls in valuation, if any. There is no specific provision to not to share copy of valuation report with ex-directors, it is held that in interest of justice the copy of valuation report needs to be supplied to ex-directors, as already directed by the Predecessor Bench - the Resolution Professional are directed to supply copy of valuation report to the applicants within 2 days of this order. Application allowed in part. - IA No. 434 of 2020 in CP (IB) 602 of 2018 - - - Dated:- 30-3-2022 - Dr. Deepti Mukesh, Member (J) And Kaushalendra Kumar Singh, Member (T) For Appearing Parties: Arjun Sheth, Nipun Singhavi, Advs., Kiran Shah, FCA, Navin Pahwa, Learned Senior Counsel and Hiten Parikh, CA ORDER Kaushalendra Kumar Singh, Member (T) 1. The instant Interlocutory Application is filed by Hemant Shantilal Shah and Heena Hemant Shah being ex-directors, of corporate debtor (for brevity 'Applicants& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of paragraph 86(f) hereinabove and/or h) Pass any other order(s) that this Hon'ble Adjudicating Authority deems fit. 2. The Predecessor Bench, had directed vide order dated 15.12.2020, as follows RP is directed to file liquidation value and a valuation report before this Adjudicating Authority with a copy to the other side, within a week, by way of an affidavit. Resolution Professional impugned the said order and filed the appeal bearing Company Appeal (AT) (Insolvency) No. 33 of 2021 and the Hon'ble NCLAT vide order dated 28/01/2021, had disposed of the appeal with observation that: It would be appropriate that the adjudicating authority take a re-look at the impugned order to the extent it directs providing liquidation value and a valuation report to the Respondent Nos. 1 and 2 i.e. Hemant Shantilal Shah and Heena Hemant Shah within the ambit of 'IB Code' and Regulations framed thereunder. The appeal is accordingly disposed of. 3. Thereafter, the Predecessor Bench heard this IA on 15.02.2021 and reserved the order. Due to Re-Constitution of the Bench, this IA is now considered by this Bench. After hearing both sides on limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervation is made- Para 13. It is also important to note that every participant is entitled to a notice of every meeting of the committee of creditors. Such notice of meeting must contain an agenda of the meeting, together with the copies of all documents relevant for matters to be discussed and the issues to be voted upon at the meeting vide Regulation 21(3)(iii). Obviously, resolution plans are matters to be discussed at such meetings, and the erstwhile Board of Directors are participants who will discuss these issues. The expression documents is a wide expression which would certainly include resolution plans. Relying on this judgement. The applicants prayed that copy of valuation report be supplied to them. 6. The respondent has also filed its written submission that valuation of the corporate debtor is filed before the Hon'ble Adjudicating Authority in a sealed cover for the perusal, as directed vide order dated 15.12.2020. However, with respect to the direction to provide a copy of valuation report to the other side, it was challenged by Resolution Professional before Hon'ble NCLAT, wherein vide order dated 28.01.2021, it is observed that as liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment dated 31.01.2019 of Hon'ble Supreme Court in Vijay Kumar Jain V. Standard Chartered Bank Ors. (Civil Appeal No. 8430 of 2018) wherein the copy of the resolution plan was directed to be given to ex-directors. On reading the judgment, we found following paras relevant to this case and decide the issue before us: Para 12.... Even assuming that the Notes on Clause 24 may be read as being a one-way street by which erstwhile members of the Board of Directors are only to provide information, we find that Section 31(1) of the Code would make it clear that such members of the erstwhile Board of Directors, who are often guarantors, are vitally interested in a resolution plan as such resolution plan then binds them. Such plan may scale down the debt of the principal debtor, resulting in scaling down the debt of the guarantor as well, or it may not. The resolution plan may also scale down certain debts and not others, leaving guarantors of the latter kind of debts exposed for the entire amount of the debt. The Regulations also make it clear that these persons are vitally interested in resolution plans as they affect them. Thus, under Regulation 36 of the CIRP Regulations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pies of all documents relevant for matters to be discussed and the issues to be voted upon at the meeting vide Regulation 21(3)(iii). Obviously, resolution plans are matters to be discussed at such meetings, and the erstwhile Board of Directors are participants who will discuss these issues. The expression documents is a wide expression which would certainly include resolution plans. 14. Under Regulation 24(2)(e), the resolution professional has to take a roll call of every participant attending through video conferencing or other audio and visual means, and must state for the record that such person has received the agenda and all relevant material for the meeting which would include the resolution plan to be discussed at such meeting. Regulation 35 makes it clear that the resolution professional shall provide fair value and liquidation value to every member of the committee only after receipt of resolution plans in accordance with the Code [see regulation 35(2)]. Also, under Regulation 38(1)(a), a resolution plan shall include a statement as to how it has dealt with the interest of all stakeholders, and under sub-clause 3(a), a resolution plan shall demonstrate that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors specially when the ex-management alleges and apprehends that properties of corporate debtor are being valued and offered at throw away price. In our view, the ex-management is the appropriate concerned parties to comment on valuation of properties of corporate debtor. The corporate debtor is the body of Ex-management and they were in control and handling the same till CIRP initiation. It would be pre-judicial if they are not even allowed to view the valuation and point out the shortfalls in valuation, if any. The intent of code being maximization of value while insolvency resolution process, all concerned should be given access to the document which will be crucial for deciding worth of corporate debtor which is intended to be given new lease of life. There is no specific provision to not to share copy of valuation report with ex-directors, we hold that in interest of justice the copy of valuation report needs to be supplied to ex-directors, as already directed by the Predecessor Bench. Accordingly, we direct Resolution Professional to supply copy of valuation report to the applicants within 2 days of this order. 10. We are of the opinion that Resolution Professional ..... X X X X Extracts X X X X X X X X Extracts X X X X
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