Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Rakesh Kumar Jain (Judicial Member), Justice Mohd. Faiz Alam Khan (Judicial Member), and Mr. Naresh Salecha (Technical Member), has upheld adverse remarks made by the National Company Law Tribunal (NCLT) against the suspended directors of M/s Star Mineral Resources Pvt. Ltd., while ordering its dissolution. The observations pertained to the directors’ non-cooperation in providing statutory records to the Resolution Professional (RP) and Liquidator, and their continuous absence before the Tribunal despite service through email and postal addresses available in the MCA database.

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The appeal, filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), sought to set aside the NCLT’s findings recorded in paragraph 7(ii) of its order dated 07.12.2023 in I.A. No. 2490/2022 in CP (IB) No. 607/ND/2018.

Appellants’ Case

The suspended directors contended that they were neither involved in the day-to-day affairs nor in the management or operations of the Corporate Debtor (CD). They claimed they had never received any communication regarding the commencement of the Corporate Insolvency Resolution Process (CIRP), and therefore, there was no occasion for non-cooperation. They alleged that no notices for Committee of Creditors (CoC) meetings were issued to them and that correspondence from the IRP had been directed solely to promoter-director Mr. Gagan Shukla.

The appellants detailed that in July 2014, they invested ₹5 crore in the CD — part in equity and part as an interest-free loan — along with an additional ₹49,99,950/-. In return, they held 51% equity and were allotted three Board seats as non-executive directors, with daily management left to promoter-directors, as recorded in the agreement. They claimed to have suffered heavy financial losses and filed a police complaint in December 2022 against the promoter-directors for fraud.

They further alleged that notices under Sections 19(2) and 70 of the IBC were never served upon them, that summons and warrants did not reach them, and that they learned of the CIRP only upon receiving process from a criminal court. The appellants argued that the NCLT’s remarks violated natural justice as they were made without granting them an opportunity of hearing.

Respondent’s Stand

The Liquidator opposed the appeal, questioning its maintainability and arguing that the appellants could not be considered ‘aggrieved persons’ under Section 61 IBC. He submitted that all communications, including notices under Sections 19 and 70, were sent to the appellants’ email IDs and postal addresses as per the MCA database. Some notices were served, while others returned undelivered. The Liquidator asserted that the appellants deliberately avoided appearances despite multiple emails and notices sent over several years.

It was further argued that, given the appellants’ substantial investment and 51% equity stake, it was implausible that they were unaware of the CIRP or liquidation. The Liquidator contended that the appeal was a tactic to build a defence in the ongoing criminal prosecution initiated on the RP’s complaint.

NCLAT’s Findings

The NCLAT noted that the NCLT’s observations were based on records showing repeated service of process via email and postal addresses listed in the MCA database. The Tribunal highlighted that other directors had responded to similar communications, making the appellants’ denial of service untenable. It stressed that directors are legally obliged to update their addresses with the MCA, and no evidence suggested the appellants had done so.

The Bench observed: “It is hard to believe that despite investing about ₹5.5 crores in the Corporate Debtor, the Appellant Directors would not be having any information with regard to the commencement of the CIRP of the CD and also of its liquidation.” The NCLAT found no violation of natural justice, noting that the NCLT and IRP/RP had made sincere efforts to secure the appellants’ participation, including coercive measures. It held that the remarks in paragraph 7(ii) were factual narrations drawn from the record and were relevant to justify the dissolution of the Corporate Debtor.

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Finding no merit in the challenge, the NCLAT dismissed the appeal, holding that the NCLT had rightly recorded the appellants’ non-cooperation and failure to provide statutory records, and that the adverse remarks could not be expunged. No order as to costs was made, and all pending applications were disposed of.

Appearance

For Appellant: Ms. Sakshi Tikmany & Mr. Akshat Gupta Advocates

For Respondent: Mr. Naresh Kumar Bansal & Ms. Kritika Bansal, Advocates

Cause Title: Bimal Kumar Jejani and Ors. V. M/s Star Mineral Resources Pvt. Ltd. and Ors.

Case No: Company Appeal (AT) (Insolvency) No. 224 of 2024

Coram: Justice Rakesh Kumar Jain [Judicial Member], Justice Mohd. Faiz Alam Khan [Judicial Member], Mr. Naresh Salecha [Technical Member]