The National Company Law Appellate Tribunal (“NCLAT”) has recently, in its judgment dated April 20, 2023 in Bhushan Shringapure v. Mr. B.K. Mishra, has held that, Section 24(3) of the Insolvency and Bankruptcy Code, 2016 (“IBC'') is mandatory in nature. The NCLAT held that it is incumbent upon a Resolution Professional (“RP”) to serve notice of each meeting of the Committee of Creditors (“CoC”) to the Operational Creditor(s) (“OC”) if the aggregate dues owed to the OCs is more than 10% of the entire debt of the Corporate Debtor (“CD”).
Bhushan Shringapure, Shinde Chemicals and Pals Pharma (“Appellants”) filed an appeal challenging the order of the National Company Law Tribunal, Mumbai (“NCLT”) dated September 19, 2022 by which NCLT approved the resolution plan of the CD and refused to consider the plea that there was non-compliance of the Section 24(3)(c) and Section 24, IBC.
Appellants were a part of OCs. It was an admitted fact that the claim of all the OCs cumulatively amounted to Rs. 24.98 crores which is more than 10% of the admitted debt of the CD. Despite having cumulative debt of more than 10% of the entire admitted debt of the CD, the RP did not issue any notice to the OCs inviting them to sit for the CoC meetings of the CD in terms of Section 24(3)(c), IBC.
Whether it is mandatory on part of the RP to issue notice to all the OCs in terms of Section 24(3)(c), IBC if it is found that the admitted claim of OCs is more than 10%?
Submissions by the parties:
Appellants made the following submissions:
Respondent No.1/ RP made the following submissions:
Please find attached a copy of the judgment.
This update has been contributed by Udit Mendiratta (Partner) and Shivkrit Rai (Associate).
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