NCLAT Rules, No Provision Under IBC Mandating Resolution Professional To Share Valuation Report With Suspended Management Of Corporate Debtor
Pranav B Prem
The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT), comprising Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member), has clarified that there is no statutory requirement under the Insolvency and Bankruptcy Code, 2016 (IBC) or the associated CIRP Regulations mandating a Resolution Professional (RP) to provide a valuation report to the suspended management of a Corporate Debtor.
Background of the Case
M/s. Medirad Tech India Ltd. was admitted into Corporate Insolvency Resolution Process (CIRP) on 08.12.2021 following an application under Section 7 of the IBC by M/s India SME Assets Reconstruction Company Ltd. (ISARC). Subsequently, a Committee of Creditors (CoC) was formed comprising two members: ISARC and Technology Development Board (TDB).
The RP invited resolution plans and presented two of them before the CoC during its 5th meeting. Eventually, Asian Institute of Oncology Pvt. Ltd. (AIOPL) emerged as the Successful Resolution Applicant (SRA) and its plan was approved by the CoC in the 9th meeting.
The RP then filed IA No. 5617/2022 before the NCLT for approval of the plan. The Appellant, a member of the suspended board of the Corporate Debtor, raised several objections, all of which were dismissed by the NCLT. The Appellant then approached the NCLAT under Section 61 of the IBC.
Allegations Raised by the Appellant
The Appellant argued that:
The CIRP was conducted in a malafide manner, favoring secured Financial Creditors by allowing allegedly inflated claims.
The RP refused to provide the valuation report despite specific requests.
The RP failed to properly disclose terms related to a lease deed with the Government of Odisha, potentially causing breach of lease conditions.
The RP ignored a Section 12A settlement proposal submitted by the Appellant.
The valuation of the Corporate Debtor (fair value of ₹50.73 crore and liquidation value of ₹40.51 crore) was artificially inflated and lacked transparency.
Tribunal's Analysis
On Valuation Report and Suspended Management's Rights: The NCLAT ruled unequivocally that under Regulation 35(2) of the CIRP Regulations, valuation reports, including fair value and liquidation value, are confidential and meant only for CoC members who provide confidentiality undertakings. There is no statutory obligation to share these with the suspended management. The RP had fulfilled their obligation by appointing registered valuers and submitting the report to the CoC, thereby discharging their duties under Section 25 of the IBC.
On Allegations of Inflated Claims: The Appellant accused the RP of accepting inflated claims, specifically from ISARC and TDB. However, the Tribunal noted that TDB, after initially raising concerns and obtaining detailed documents from the RP, chose not to pursue the issue further. This indicated a resolution of doubts among CoC members. Thus, the Tribunal found no substance in the allegation of inflated claims or bias against the Corporate Debtor.
On Section 12A Proposal: The Appellant had also submitted a settlement proposal under Section 12A of the IBC, which was presented before the CoC. However, the CoC chose not to accept it. The Tribunal reaffirmed that the RP’s duty is only to present the proposal; the decision lies entirely within the CoC’s commercial wisdom. The RP could not be faulted for the CoC’s inaction on the proposal.
On Compliance with Government of Odisha Lease Terms: The RP had received a communication from the Government of Odisha reminding them to ensure that terms of Lease Deed Nos. 6193 and 1435 were not breached. The RP responded on 29.08.2022 and again on 18.11.2022, assuring compliance. The Tribunal noted that the SRA intended to use the land for the same purpose—a cancer hospital—with an expanded capacity. Therefore, no change in land use had occurred, and no permission was necessary. The Tribunal held that the suspended management had no locus to raise issues concerning the lease deed’s compliance.
Final Holding
The Tribunal held that neither the IBC nor CIRP Regulations required the valuation report to be shared with the suspended management. The RP acted within the statutory framework. Further, objections raised by the Appellant concerning inflated claims, lease compliance, and settlement offers lacked merit. The appeal was dismissed.
Appearance
For Appellant: Mr. Tishampati Sen, Mr. Shubhanshu Gupta, Advocates.
For Respondent: Mr. Gaurav Mitra, Mr. Shouryendu Ray, Ms. Vatsala Poddar, Ms. Aarushi Mishra, Ms. Neelu Mohan, Advocates.
Cause Title: Dr. Arabinda Kumar Rath V. Siba Kumar Mohapatra
Case No: Company Appeal (AT) (Insolvency) No. 1482 of 2023
Coram: Justice Ashok Bhushan [Chairperson], Barun Mitra [Member (Technical)]
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