No Provision Under IBC Mandating Resolution Professional To Share Valuation Report With Suspended Management Of Corporate Debtor: NCLAT

Brief Facts:

M/s Medirad Tech India Ltd. (Corporate Debtor) was admitted into the Corporate Insolvency Resolution Process (CIRP) on 08.12.2021 following the admission of a Section 7 application filed by M/s India SME Assets Reconstruction Company Ltd. (ISARC). Upon initiation of CIRP, the Interim Resolution Professional, later confirmed as the Resolution Professional (RP), constituted a Committee of Creditors (CoC) comprising ISARC and Technology Development Board (TDB).

Resolution Professional (RP) invited resolution plans and presented two plans before the CoC, as recorded in the minutes of the 5th CoC meeting dated 05.05.2022. After evaluation, Asian Institute of Oncology Pvt. Ltd. (AIOPL) was selected as the Successful Resolution Applicant (SRA) in the 9th CoC meeting. The RP filed IA No. 5617 of 2022 before the Adjudicating Authority seeking approval of AIOPL's resolution plan, which was duly approved, with objections raised by the present Appellant being dismissed.

Contentions:

The Appellant submitted that the RP had conducted CIRP of the Corporate Debtor in a malafide manner whereby recovery by the secured Financial Creditors was accorded undue primacy at the cost of the interests of the Corporate Debtor.

It was further submitted that inspite of the request of the Appellant made to the RP for providing the valuation report, the request had been rejected.

Per contra, the Respondent submitted that the objections raised by the Appellant with regard to alleged inflated claims of the Financial Creditors was misleading. Emphasising that both the Secured Financial Creditors had public profile and therefore could not have behaved in an unbecoming manner.

It was further contended that the Appellant had no locus to comment on whether there had been any breach of any conditions of the lease as it was the Government of Odisha which was the appropriate entity to decide on whether there was any deviation from the terms and conditions of the Lease Deed.

Observations:

The Tribunal at the outset noted that after receiving Form-C submitted by ISARC, TDB did not pursue the matter further, indicating that any doubts it had regarding ISARC's claims had been resolved. This clearly demonstrates that TDB chose not to dispute the claims admitted in favour of ISARC and did not raise any further objections or discrepancies.

The Tribunal further observed that it was therefore reasonable for the Adjudicating Authority to conclude that TDB's apprehensions regarding ISARC's claim had been resolved. We also concur with the RP's submission that, given there were only two Financial Creditors in the CoC who had clarified and settled any doubts regarding each other's claims, and no inter se dispute remained concerning the quantum of claims, they had effectively chosen to put the matter to rest.

Based on the above, it held that in this context, the suspended management of the Corporate Debtor lacks the locus to raise baseless allegations concerning the quantum of claims submitted by the Financial Creditors and admitted by the RP.

It further opined that when the resolution plan of the SRA took care of the interest of every stakeholder substantively and no complaint has been received from either the Secured Financial Creditors or Operational Creditors of having been made to suffer any arbitrary hair-cut, there is no merit in the bogey of admission of inflated claims by the RP as raised by the Appellant.

Coming to the next argument, the Tribunal observed that the letter dated 03.09.2022 from the Government of Odisha, addressed to the RP, clearly acknowledged that the Corporate Debtor had been admitted into CIRP by order dated 08.12.2021. The letter merely advised the RP to take note of the specific conditions contained in Registered Lease Deed No. 6193 dated 03.11.2000 and No. 1435 dated 24.02.2006, and to ensure adherence to those terms to avoid future litigation.

Based on the above, it held that a plain reading of the letter does not indicate any breach of the lease deeds by the RP. It simply urged the RP to exercise caution and ensure that the terms of the lease were not violated or overridden during the resolution process.

The Tribunal further opined that no permission was required from the Government of Odisha, as there was no change in the purpose for which the land was being used, nor was the land being sold. The business activity proposed by the Successful Resolution Applicant (SRA) under the approved resolution plan aligned with the original purpose for which the lease had been granted to the suspended management.

It held that the question of whether the terms of the Lease Deed have been breached is a matter solely within the domain of the Government of Odisha, as the Lessor. The Appellant, being the suspended management of the Corporate Debtor, has no locus standi to determine or allege any breach of the Lease Deed.

The Tribunal also observed that the obligation of the RP under CIRP Regulations and IBC is limited only to the appointment of the registered valuers, while the valuation is to be approved by the CoC under the mandate of commercial wisdom. Thus, the RP cannot be faulted on this count as it had discharged its statutory responsibility having appointed the valuers and submitted their report to the CoC for its consideration.

Based on the above, it held that whether the detailed valuation report was placed before the Appellant or not is immaterial and irrelevant since it is only the members of the CoC who were required to exercise the commercial wisdom on the valuation reports placed before them and not the Appellant who did not have the right to exercise their vote.

The Tribunal further held that the Adjudicating Authority rightly observed in paragraph 29 that neither the IBC nor the CIRP Regulations mandate the Resolution Professional (RP) to share the valuation report of the Corporate Debtor with its suspended management.

It further held that Regulation 35(2) of the CIRP Regulations states that fair value and liquidation value should remain confidential, limiting their disclosure exclusively to members of the Committee of Creditors (CoC). Accordingly, the RP did not violate any statutory provision by declining the Appellant's request for access to the valuation report.

Accordingly, the present appeal was dismissed.

Case Title: DR. ARABINDA KUMAR RATH Versus SIBA KUMAR MOHAPATRA

Case Title: Company Appeal (AT) (Insolvency) No. 1482 of 2023

Judgment Date: 07/05/2025

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.