Suspended Directors are Directors whose power to act as Directors are suspended by virtue of initiation of CIRP, rules NCLAT, Read Judgement

The NCLAT, Principal Bench New Delhi ruled that Suspended Directors are Directors whose power to act as Directors are suspended by virtue of initiation of CIRP. Suspended Directors may include those Directors of the Corporate Debtor who were working in such capacity on the date of initiation of the CIRP.

Brief Facts:

Appellant was Director of the Corporate Debtor M/s. Valecha Engineering Ltd. who resigned in 2019.

The Appellant filed an application asking for copy of the Resolution Plan as approved by the CoC of the Corporate Debtor. The application was rejected by the NCLT. Hence, the appeal.

Contentions of the Appellants:

It was argued that Appellant was ex-Director of the Corporate Debtor and had also given guarantee, hence,  widely affected by the approval of the Resolution Plan.

Contentions of the Respondents:

It was contended that CoC approved the Resolution Plan with majority. Resolution Plan also include the third-party receivables which fully covered any amount which was received by the Corporate Debtor from third-party, which might also cover the amount received out of Performance Bank Guarantee given by the Corporate Debtor to different authorities.

Observations of the Tribunal:

It was observed that valuation was conducted by the RP in accordance with CIRP Regulations, 2016.

The Bench opined that that Members of the Suspended Board of Directors who may also be Guarantors of the Corporate Debtor are entitled to receive all relevant documents, including the Resolution Plan.

In terms of facts of the present case, it was observed that the Appellant had resigned more than two years prior to initiation of the CIRP and hence could not be held to be a Suspended Director.

It was ruled that Suspended Directors are Directors whose power to act as Directors are suspended by virtue of initiation of CIRP. Suspended Directors may include those Directors of the Corporate Debtor who were working in such capacity on the date of initiation of the CIRP.

The decision of the Tribunal:

Based on aforementioned facts and findings, appeals were rejected.

Case Title: Jagdish Valecha  v. Anurag Kumar Sinha & Ors. with connected matter

Case No.: Company Appeal (AT) (Insolvency) No. 1542 of 2024 with connected matter
Coram: Justice Ashok Bhushan, Barun Mitra (Technical Member)

Advocates for Appellants: Advs.Mr. Krishnendu Datta, Sr. Advocate with Mr. Tushar Ajnkya, Ms. Pratiksha Sharma, Ms. Tanishka Desai, Ms. Alina Merin Mathew, Ms. Ritu Chaudhary and Mr. Saahil Bijliwala

Advocates for Respondents: Advs. Mr. Gopal Jain, Sr. Advocate with Mr. Dhananjaya Sud, Mr. Lokesh Malin, Mr. Akhand Pratap, Ms. Swechcha Mishra, Mr. Manlik Chokshi, Ms. Rajnandini Singh and Ms. Suvarna Kashyap, Mr. Milan Singh Negi, Mr. Nikhil Kumar Jha and Ms. Aakriti Gupta, Mr. Gaurav Mitra, Mr. Ankit Acharya and Ms. Lavanya Pathak

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