Case Note & Summary
The case involves an appeal by Binjusaria Ispat Pvt Ltd, an operational creditor of Abhirama Steels Ltd, against an order dated 17.09.2024 passed by the National Company Law Tribunal (NCLT) in IA No.1180/2024 in CP (IB) No.525/9/HDB/2019. The appellant challenged the impugned order on the sole ground that the Resolution Professional (RP) failed to comply with Section 24(3)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC), which mandates that notice of every meeting of the Committee of Creditors (COC) be given to every creditor, including operational creditors. The appellant argued that no such notice was issued to it, and the NCLT had erroneously held that non-compliance did not adversely affect the appellant's interest. The NCLAT, relying on the Supreme Court's judgment in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni (dated 12.02.2024), held that compliance with Section 24(3)(c) is mandatory. The Supreme Court had observed that failure to serve notice of COC meetings, conducting proceedings ex parte, and approving a resolution plan without considering the creditor's claim are serious irregularities. The NCLAT set aside the impugned order and directed that the resolution plan be reconsidered after issuing proper notice to the appellant. The appeal was allowed.
Headnote
A) Insolvency Law - Mandatory Notice to Operational Creditor - Section 24(3)(c) IBC - The provision requiring notice of Committee of Creditors meeting to every creditor, including operational creditors, is mandatory. Failure to issue such notice, even if the creditor's interest is not adversely affected, vitiates the proceedings. The Supreme Court in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni held that non-service of notice and ex parte proceedings are fatal. (Paras 1-3)
B) Insolvency Law - Resolution Plan Approval - Section 30(2) IBC read with CIRP Regulations - A resolution plan must meet all parameters under Section 30(2) and Regulations 37 and 38. Non-compliance with mandatory notice requirements under Section 24(3)(c) leads to setting aside of the approval order. (Paras 2-3)
Issue of Consideration
Whether compliance of Section 24(3)(c) of the Insolvency and Bankruptcy Code, 2016 is mandatory and whether failure to issue notice to an operational creditor before the Committee of Creditors meeting renders the approval of resolution plan invalid.
Final Decision
Appeal allowed. Impugned order dated 17.09.2024 set aside. Resolution plan to be reconsidered after issuing proper notice to the appellant in accordance with Section 24(3)(c) IBC.
Law Points
- Section 24(3)(c) of IBC
- 2016 is mandatory
- notice of COC meeting must be issued to all creditors including operational creditors
- non-compliance vitiates resolution plan approval
Case Details
2024 LawText (NCLAT) (01) 89
Company Appeal (AT) (CH) (Ins) No.405/2024 (IA Nos. 1103,1104/2024)
Mr. Om Prakash, Senior Advocate & Mr. Amir Bavani, Advocate
Binjusaria Ispat Pvt Ltd.
Maruti Venkata Subba Rao Poluri, RP of Abhirama Steels Ltd.
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Nature of Litigation
Appeal against NCLT order approving resolution plan without mandatory notice to operational creditor
Remedy Sought
Setting aside of impugned order dated 17.09.2024 and direction to issue notice under Section 24(3)(c) IBC
Filing Reason
Non-compliance of Section 24(3)(c) IBC - notice of COC meeting not given to appellant operational creditor
Previous Decisions
NCLT passed order dated 17.09.2024 in IA No.1180/2024 in IA (IBC) (PLAN) 10/2024 in CP (IB) No.525/9/HDB/2019, holding that non-compliance did not adversely affect appellant's interest
Issues
Whether compliance of Section 24(3)(c) IBC is mandatory?
Whether failure to issue notice to operational creditor before COC meeting renders resolution plan approval invalid?
Submissions/Arguments
Appellant argued that no notice under Section 24(3)(c) was given to it, and the NCLT erred in holding that non-compliance did not adversely affect its interest.
Respondent argued that non-compliance did not affect appellant's interest.
Ratio Decidendi
Compliance of Section 24(3)(c) of the Insolvency and Bankruptcy Code, 2016 is mandatory. Notice of every meeting of the Committee of Creditors must be given to every creditor, including operational creditors. Failure to issue such notice vitiates the proceedings and approval of resolution plan, as held by the Supreme Court in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni.
Judgment Excerpts
The solitary ground as it has been argued by the Ld. counsel for the Appellant, while putting a challenge to the Impugned Order dated 17.09.2024 as passed in IA No.1180/2024, rendered in IA (IBC) (PLAN) 10/2024, in CP (IB) No.525/9/HDB/2019, had been that, compliance of the provisions under Section 24 (3)(c) was not done and issue of notice under Section 24(3)(c) of I & B Code 2016, was not done on the premise that it would not adversely affect, the interest of the Appellant, who was the Operational Creditor.
However, on the contrary, the compliance of the aforesaid provision has been held to be mandatory and prior issue of notices is required, in accordance with, the Judgment of the Hon’ble Apex Court as rendered in the matters of Greater Noida Industrial Development Authority Versus Prabhjit Singh Soni & Anr.
Procedural History
The NCLT passed an order on 17.09.2024 in IA No.1180/2024 in IA (IBC) (PLAN) 10/2024 in CP (IB) No.525/9/HDB/2019, approving the resolution plan without issuing notice to the appellant operational creditor under Section 24(3)(c) IBC. The appellant filed an appeal before NCLAT challenging the order. NCLAT allowed the appeal on 14.11.2024.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: 24(3)(c), 30(2)
