In UltraTech Cement case:
NCLAT lays out do’s and
don’ts for resolution professionals
SECRECY TO BE MAINTAINED BY
RPs
A resolution professional (RP) can neither determine the eligibility
of resolution applicants under section 29(A) of the Insolvency and Bankruptcy
Code (IBC), nor disclose and discuss submitted plans to any competing bidder.
Dos and don’ts for RPs
A resolution
professional (RP) can neither determine the eligibility of resolution
applicants under section 29(A) of the Insolvency and Bankruptcy Code (IBC), nor
disclose and discuss submitted plans to any competing bidder, the National
Company Law Appellate Tribunal (NCLAT) has said laying out the dos and don’ts
for officials conducting the resolution process.
RP IS TO
EVALUATE THE RESOLUTION PLANS SUBMITTED
The appellate
tribunal also pointed out that the RP’s job was to prepare an information
memorandum, provide applicants with all relevant information and subsequently,
check whether submitted plans were in line with the provisions of law, before
putting them to the committee of creditors (CoC) for its approval. The NCLAT
said these earlier in the week while hearing a petition filed by UltraTech Cement,
which is competing with Rajupatana Properties for taking over Binani Cement.
UltraTech Cement’s Plea
In its plea,
UltraTech Cement had said though the law allows only the CoC and the
adjudicating authority to decide on the eligibility, Binani Cement’s RP took
the onus upon himself. Rajputana’s counsel, however, defended the RP’s
decision, saying it was within the RP’s domain to take a call on such issues.
The NCLAT said while the resolution plans are opened before the CoC, the RP is
entitled to be present and at this stage, he may also point out whether an
applicant is eligible or not under Section 29 (A).
RP don’t have
power to decide who is ineligible under section 29(A)
“Prima facie, in
absence of any information through any source while scrutinizing the resolution
plan under Section 30 (2), the RP cannot hold or decide as to who is ineligible
under Sections 29(A). Section 30 (2) does not confer such power to the RP, nor
there is any other provision conferring such power to the RP to scrutinize the
eligibility of one or other resolution applicant,” the NCLAT has observed.
CONFIDENTIALITY
OF RESOLUTION PLAN SHOULD BE MAINTAINED BY RP
“As per Section 30
(2), the RP is required to examine whether resolution plans confirm the
provisions as mentioned therein, but he cannot disclose it to any other person
including resolution applicant(s), who has submitted the resolution plan.
According to us, the resolution plan submitted by one or other resolution
applicant being confidential cannot be disclosed to any competitor resolution
applicant nor any opinion can be taken or objection can be called for from
other resolution applicants with regard to one or other resolution plan,” it
added.
NOTICE OF
MEETING OF CoC IS TO BE GIVEN TO ALL STAKEHOLDERS
The appellate
tribunal also observed that the RP should give notice of the meeting to the
members of the CoC. He should also give notice of such meeting to the members
of the (suspended) board of directors or partners of the company as also to the
operational creditors or their representatives. Though directors, partners and
representatives of operational creditors can express their views in the meeting
to help CoC to come to a conclusion on rejecting or approving any resolution
plan, they would not have the right to vote in such meetings, as per section 24
(4).
CoC has to
record in writing the reasons for accepting or rejecting a resolution plan
“We are of the view
that the CoC should record reasons (in short) while approving or rejecting one
or the other resolution plan,” it said “After decision of the CoC, the RP is required
to place the decision before the adjudication authority under Section 31. The
adjudicating authority who is required to take decision as per section 31 of
the IBC, can go through the reasoning to accept or reject one or other
objection or suggestion and may express its opinion/decision,” the NCLAT said.
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