UltraTech Cement case: NCLAT lays out do’s and don’ts for resolution professionals

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New Delhi | Published: May 19, 2018 1:13:41 AM

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.

ultra tech, nclt, binani, nclt, UltraTech Cement, binani cementSays RPs can neither determine eligibility of applicants nor disclose submitted plans to any bidder.

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.

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.

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).

“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.

“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.

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).

“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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