The suspended Board of Directors of Corporate Debtor, though they have no right to vote in the Committee of Creditors, are entitled to get the copy of resolution plans-Supreme Court

The Supreme Court lays down a law that the erstwhile Board of Directors shall have a right to comment upon the resolution plan  before the Committee of Creditors and hence they are entitled to receive the resolution plans as any other member of the Committee of Creditors.

In the case on hand, the suspended Board of Directors sought for a copy of resolution plan proposed to be discussed in the Meeting of Committee of Creditors which has been refused by the Resolution Professional. The suspended Director approached the NCLT against the decision of the Resolution Professional. NCLT has also dismissed the application, which has also been confirmed by NCLAT. Against the order of NCLAT, the suspended Director approached the Supreme Court. Upon analysing the various Sections and Regulations  of the Code, the Supreme Court held that the operational creditors, who have no right to vote in the meetings of the Committee of Creditors, are entitled to receive the resolution plan and the same ratio will apply to the suspended Board of Directors also.

The Supreme Court concludes that  “9. This statutory scheme, therefore, makes it clear that though the erstwhile Board of Directors are not members of the committee of creditors, yet, they have a right to participate in each and every meeting held by the committee of creditors, and also have a right to discuss along with members of the committee of creditors all resolution plans that are presented at such meetings under Section 25(2)(i). It cannot be gainsaid that operational creditors, who may participate in such meetings but have no right to vote, are vitally interested in such resolution plans, and must be furnished copies of such plans beforehand if they are to participate effectively in the meeting of the committee of creditors. This is for the reason that under Section 30(2)(b), repayment of their debts is an important part of the resolution plan qua them on which they must comment. So the first important thing to notice is that even though persons such as operational creditors have no right to vote but are only participants in meetings of the committee of creditors, yet, they would certainly have a right to be given a copy of the resolution plans before such meetings are held so that they may effectively comment on the same to safeguard their interest.

..            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”

(Case Law: VIJAY KUMAR JAIN   V. STANDARD CHARTERED BANK & ORS. – Date of Decision of SC-31-01-2019)