NCLT Bengaluru Holds Suspended Director Cannot Challenge Resolution Plan After Skipping CoC Meetings and Delaying CIRP
NCLT Bengaluru Holds Suspended Director Cannot Challenge Resolution Plan After Skipping CoC Meetings and Delaying CIRP
Introduction
The National Company Law Tribunal has held that a suspended director who had due notice of Committee of Creditors (CoC) meetings, but failed to meaningfully participate or seek documents at the appropriate stage, cannot later challenge the corporate insolvency resolution process on the ground of non-supply of documents. The Tribunal dismissed the application as an abuse of process, applying the doctrine of unclean hands.
Factual Background
Dreamz Infra India Ltd., a real estate developer operating since 2011, had undertaken several housing projects, many of which remained incomplete. In 2016, multiple complaints alleging financial irregularities led to criminal proceedings.
The suspended Managing Director, Disha Choudhary, alleged that fraud had been committed by her husband along with other employees, resulting in siphoning of funds and stoppage of operations. Meanwhile, CIRP was first initiated in relation to one project and later admitted in respect of the Samhita Project upon an application by the homebuyers’ association.
During CIRP, resolution plans were invited and the CoC approved the plan submitted by a consortium with 83.05% voting share. Thereafter, the Resolution Professional moved an application seeking approval of the plan.
Procedural Background
The suspended director filed an application before the NCLT seeking rejection of the resolution plan approval application. The challenge was based on alleged non-supply of the resolution plan, information memorandum, and other related CIRP documents.
Issues
1. Whether a suspended director can challenge the resolution plan on the ground of non-supply of documents after failing to participate in CoC meetings.
2. Whether non-sharing of the final resolution plan invalidates the CIRP process where the suspended director had notice and partial participation.
3. Whether the application amounted to abuse of process intended to derail CIRP.
Contentions of the Parties
The applicant contended that because her properties and accounts had been attached, she was unable to effectively participate earlier in the CIRP. She argued that despite requests, the Resolution Professional failed to provide copies of the resolution plan, information memorandum, and related material, thereby violating her rights.
The Resolution Professional opposed the plea, pointing out that the applicant had attended the 5th CoC meeting where the resolution plan was deliberated but made no request for documents at that stage. It was also submitted that she had repeatedly failed to attend earlier meetings despite receiving notices and had instead filed multiple proceedings before different forums, thereby obstructing timely completion of CIRP.
Reasoning and Analysis
The Tribunal found that the applicant had only attended the 5th and 7th CoC meetings and that the minutes of the 5th meeting did not record any request for the information memorandum or plan documents. Her request surfaced only after the CoC had already approved the resolution plan.
The Bench held that this conduct demonstrated a strategic attempt to stall and frustrate the CIRP rather than any genuine grievance regarding lack of access. It observed that by remaining silent during the critical 5th CoC meeting and seeking documents only after plan approval, the applicant’s objective was to derail the process.
Relying on the NCLAT decision in Yarlagadda Krishna Mohan v. Dantu Indu Sekhar, the Tribunal reiterated that non-sharing of the final plan does not vitiate the process where the suspended director had notice of meetings, awareness of the proceedings, and an opportunity to participate. The Tribunal stressed that such a suspended director cannot expect to be “spoon-fed” with the resolution plan after choosing not to avail the procedural opportunities already available.
Applying the unclean hands doctrine, the Tribunal concluded that the application was a motivated attempt to obstruct the resolution of the Samhita Project.
Decision
The application filed by the suspended director was dismissed, and the Tribunal refused to interfere with the resolution plan approval process.
In this case the appellant was represented by Advocates P.L Jaichandani and Pawan J. Meanwhile the respondent was represented by Advocate Chithra Nirmala.
