NCLT Bengaluru Says Suspended Director Cannot Challenge Resolution Plan After Skipping CoC Meetings

The National Company Law Tribunal (NCLT) at Bengaluru has held that a suspended director who had notice of meetings of Committee of Creditors but failed to effectively participate or seek documents cannot later challenge the resolution process on that ground.

A coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada has dismissed an application filed by a suspended director of an infra company seeking rejection of a resolution plan on the ground of non-supply of documents.

“The unclean hands doctrine applies squarely to the case in hand, rendering the Application an abuse of process.” it held

Dreamz Infra India Ltd, engaged in real estate development since 2011, had undertaken multiple housing projects, several of which remained incomplete. It was stated that in 2016, multiple complaints were lodged against the company alleging financial irregularities, following which criminal proceedings were initiated. The suspended Managing Director, Disha Choudhary, claimed that fraud had been committed by her husband in connivance with other employees, leading to siphoning of funds and eventual halt of operations.

Meanwhile, corporate insolvency resolution process was initiated in respect of Dreamz Sumadhur Project and subsequently, on an application by homebuyers' association, CIRP was admitted and a resolution professional was appointed.

During CIRP, resolution plans submitted by prospective applicants were considered, and the Committee of Creditors approved the resolution plan submitted by a consortium with 83.05% voting share. The resolution professional thereafter filed an application seeking approval of the plan.

Choudhary contended that due to attachment of her properties and accounts, she was unable to effectively participate earlier, and that despite requests, copies of the resolution plan, information memorandum, and related documents were not provided to her.

Accordingly, she sought rejection of the resolution plan approval application and directions to furnish all relevant documents.

The resolution professional contended that although Choudhary was present in the 5th CoC meeting where the resolution plan was deliberated, no request for documents was made at that stage. It was further submitted that she had failed to participate in earlier CoC meetings despite receiving notices.

The Tribunal observed that Choudhary had not effectively participated in CoC meetings or sought documents in accordance with the prescribed procedure, and had instead filed multiple applications before the Tribunal and higher forums, thereby hindering the culmination of the CIRP.

“The attempt here appears to be another motivated crusade to derail the resolution process of Samhita Project that she wryly claims to be very dear to her.” it noted

The Tribunal further noted that Choudhary attended only the 5th and 7th CoC meetings and the minutes of the 5th meeting do not record any request for documents.

“By strategically maintaining silence in the 5th CoC meeting and asking for IM only on 02.03.2024 as well as data to submit the settlement Plan in the 7th meeting of the CoC held on 26.03.2024 after the Resolution Plan submitted by the was approved in the 5th CoC meeting makes it clear that the Applicant's only goal was to obstruct, stall and frustrate the CIRP proceedings and prevent Resolution of the Samhita Project of the Corporate Debtor.” it stated

Referring to the NCLAT decision in Yarlagadda Krishna Mohan v. Dantu Indu Sekhar, the Tribunal held that non-sharing of the resolution plan does not invalidate the process where the suspended director had notice of meetings and was aware of the proceedings.

“the non-sharing of the Final Plan with the Suspended Director does not invalidate the resolution process if the Suspended Director is well aware of it, was served notice to attend previous CoC meetings and participated in its 5th meeting. It cannot be said that the Suspended Director of CD with such conduct and behaviour deserved to be spoon-fed with copy of resolution Plan.” it observed

Accordingly, the application was dismissed.

For Applicant: Advocates P.L Jaichandani and Pawan J

For Respondent: Advocate Chithra Nirmala