CoC Members Entitled Only To Fair And Liquidation Value, Not Full Valuation Reports: NCLAT Chennai

The National Company Law Appellate Tribunal at Chennai has recently observed that a resolution professional is not required to share full valuation reports with lenders (CoC) during insolvency proceedings.

The tribunal referred to Regulation 35(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which provides that after receipt of resolution plans, the resolution professional shall provide the fair value and the liquidation value to members of the Committee of Creditors after obtaining confidentiality undertakings. It held that the regulation does not mandate disclosure of the complete valuation reports.

A bench of Judicial Member Justice N. Seshasayee and Technical Member Jatindranath Swain dismissed an appeal filed by Tamilnad Mercantile Bank Limited.

The bank was a dissenting financial creditor in the insolvency of Coastal Energen Private Limited. It held a 2.20 percent voting share in the Committee of Creditors.

The corporate insolvency resolution process was initiated on February 4, 2022. The resolution plan submitted by Dickey Alternative Investment Trust in consortium with Adani Power Limited was approved by 97.80 percent of the lenders on November 22, 2023. The NCLT approved the plan on 30 August 2024.

After approval, the resolution professional distributed the resolution amount. The bank received ₹52.78 crore.

The bank claimed it was entitled to Rs. 73.17 crore in terms of Section 53(1) read with Section 30(2) of the Insolvency and Bankruptcy Code. It sought the valuation reports and minutes of the monitoring committee to examine how the distribution had been calculated.

Opposing the plea, the resolution professional stated that the liquidation value had been shared with all Committee of Creditors members, including the bank, in compliance with Regulation 35 after obtaining confidentiality undertakings. He also pointed out that the bank had not raised any objection to the valuation during the insolvency process.

The appellate tribunal agreed. Referring to Regulation 35 as it stood at the relevant time, it observed that the legislature had consciously provided that only the liquidation value in summary form is to be provided to members of the Committee of Creditors and not the full valuation reports.

“Admittedly, the legislature had consciously provided for that only the liquidation value in summary form is to be provided to the members of the CoC and not the full valuation reports,” the bench said.

The tribunal further noted that the bank had not challenged the liquidation value during the insolvency period. It observed that the subsequent attempt to seek the complete valuation reports appeared to be an afterthought.

It clarified that the bank's separate application seeking payment of an additional Rs. 20.23 crore is still under consideration before the NCLT.

With these observations, the appeal was dismissed

For Appellant: Advocate D Ebenezar Inbaraj

For Respondent: Advocate T. Ravichandran