The Supreme Court of India (“SC”) directs sharing of resolution plans with the erstwhile directors of the corporate debtor

By INSOL INDIA EDITORIAL Posted On : February 20, 2019

The SC, in the case of Vijay Kumar Jain vs. Standard Chartered Bank & Ors., has held that resolution plans submitted in relation to the corporate insolvency resolution process of a corporate debtor are to be shared with the erstwhile board of directors of the corporate debtor. 

The SC relied on the following grounds of reasoning while pronouncing this judgment: 

 

  • As erstwhile board of directors of a corporate debtor have often provided guarantees in relation to the loans availed by the corporate debtor, they are vitally interested in a resolution plan which binds them as a resolution plan may provide for reduction in the amount payable to creditors, which vitally impacts the rights of guarantors; 
  • A notice of meeting of committee of creditors along with the copies of all documents relevant for the matters to be discussed and voted upon at such meetings, has to be sent to all participants. 'Participants’ as defined under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, includes the erstwhile board of directors of a corporate debtor; and
  • As resolution plans are ‘matters to be discussed’ at meetings of the committee of creditors and the erstwhile board of directors of a corporate debtor are participants at such meetings, resolution plans must be shared with the erstwhile board of directors of the corporate debtor.