NCLAT Chennai: CoC Members Entitled Only To Fair & Liquidation Value, Not Complete Valuation Reports Under Regulation 35

NCLAT Chennai: CoC Members Entitled Only To Fair & Liquidation Value, Not Complete Valuation Reports Under Regulation 35

Introduction

The present appeal before the National Company Law Appellate Tribunal (NCLAT), Chennai Bench, arose from the approval of a resolution plan in the corporate insolvency resolution process (CIRP) of Coastal Energen Private Limited. The principal question considered by the Appellate Tribunal was whether members of the Committee of Creditors (CoC) are entitled to receive complete valuation reports prepared during the CIRP or only the fair value and liquidation value as contemplated under Regulation 35 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The appeal was dismissed, with the Tribunal holding that the regulatory framework does not mandate disclosure of full valuation reports to CoC members.

Factual Background

The corporate insolvency resolution process against Coastal Energen Private Limited commenced on 4 February 2022. During the CIRP, a resolution plan submitted by Dickey Alternative Investment Trust in consortium with Adani Power Limited was approved by 97.80% voting share of the CoC on 22 November 2023. The Adjudicating Authority (NCLT) approved the resolution plan on 30 August 2024.

The Appellant, Tamilnad Mercantile Bank Limited, was a dissenting financial creditor holding a 2.20% voting share in the CoC. Upon implementation of the resolution plan, the resolution professional distributed the resolution amount, and the Appellant received ₹52.78 crore.

The Appellant contended that under Section 53(1) read with Section 30(2) of the Insolvency and Bankruptcy Code, 2016, it was entitled to Rs. 73.17 crore. To examine the basis of distribution, the Appellant sought disclosure of the full valuation reports and minutes of the monitoring committee.

Procedural Background

Aggrieved by the distribution under the approved resolution plan and the alleged non-disclosure of valuation reports, the Appellant preferred an appeal before the NCLAT. It was contended that without access to the complete valuation reports, the Appellant could not ascertain whether the distribution was compliant with the statutory framework.

The Resolution Professional opposed the appeal, asserting that the fair value and liquidation value had been duly shared with all CoC members, including the Appellant, after obtaining confidentiality undertakings, in compliance with Regulation 35. It was further pointed out that the Appellant had not raised objections to the valuation during the pendency of the CIRP.

Issues

1. Whether Regulation 35(2) of the CIRP Regulations mandates disclosure of full valuation reports to members of the Committee of Creditors.

2. Whether a dissenting financial creditor is entitled to seek complete valuation reports after approval of the resolution plan.

3. Whether the Appellant was entitled to additional payment beyond the amount received under the approved resolution plan.

Contentions of the Parties

The Appellant contended that it was entitled to receive an amount of Rs. 73.17 crore in terms of Sections 53(1) and 30(2) of the IBC and that the resolution professional had wrongly distributed a lesser sum. It argued that disclosure of the full valuation reports and monitoring committee minutes was necessary to verify whether the distribution complied with statutory requirements.

The Resolution Professional submitted that Regulation 35(2), as it stood at the relevant time, required only the fair value and liquidation value to be provided to CoC members, and not the complete valuation reports. It was further submitted that the Appellant had not objected to the valuation during the CIRP and that the subsequent demand for full reports was an afterthought. It was also clarified that the Appellant’s separate application seeking an additional ₹20.23 crore remained pending before the NCLT.

Reasoning and Analysis

The Appellate Tribunal examined Regulation 35 of the CIRP Regulations and noted that the provision specifically requires the resolution professional to provide the fair value and liquidation value to CoC members after obtaining confidentiality undertakings. The regulation does not mandate disclosure of the entire valuation reports.

The bench of Judicial Member Justice N. Seshasayee and Technical Member Jatindranath Swain observed that the legislature had consciously restricted disclosure to the liquidation value in summary form and not the full valuation reports. It held that reading such an obligation into the regulation would amount to judicial overreach.

The Tribunal further noted that the Appellant had not challenged the liquidation value or raised any objection during the CIRP. The subsequent attempt to seek complete valuation reports after approval and implementation of the resolution plan was viewed as belated and lacking merit.

While dismissing the appeal, the Tribunal clarified that the Appellant’s separate application seeking additional payment was still under consideration before the NCLT and would be decided independently.

Decision

The NCLAT dismissed the appeal, holding that members of the Committee of Creditors are entitled only to the fair value and liquidation value in terms of Regulation 35(2), and not to the complete valuation reports. The Tribunal found no infirmity in the actions of the Resolution Professional and declined to interfere with the approved resolution plan.

In this case the appellant was represented by D Ebenezar Inbaraj, Advocate. Meanwhile the respondent was represented by T. Ravichandran, Advocate.