‘Superseded Director’ who vacated office on Supersession of Board under the RBI Act not entitled to Notice of CoC meeting, has No Right to participate in meeting: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT), Delhi Bench has held that ‘Superseded director’ who vacated office on supersession of Board under the RBI Act not entitled to notice of CoC meeting, has no right to participate in meeting.

The Company Appeal has been filed by Appellant Dheeraj Wadhawan, erstwhile Promoter/Director of DHFL, against the Order dated 28 April 2020 in the Miscellaneous Application being numbered as MA 518 of 2020 in Company Petition (IB) No. 4258/2019 under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (I&B Code), seeking participation in the CoC1 of DHFL, rejected by the Adjudicating Authority/NCLT holding that the Appellant is not entitled to attend the meetings of the Committee of Creditors as member of the erstwhile Board of Directors.

The Appellants are the superseded Directors on the Erstwhile Board of Directors of the Corporate Debtor, i.e. Dewan Housing Finance Corporation Limited (“DHFL”). The Appellants are also personal guarantors for various loans the Corporate Debtor avails. The Corporate Director is a Housing Finance Company regulated under the National Housing Bank Act, 1987 (NHB Act) and Reserve Bank of India Act, 1934 (RBI Act). On 15 November 2019, the Central Government made Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (FSP Rules) that provide CIRP for Financial Service Providers such as DHFL.

The coram of Justice M. Venugopal, V. P. Singh, [Dr. Ashok Kumar Mishra has held that Superseded Directors are those Directors who have been removed or deemed to have demitted office and who were not holding the position of Director on the CIRP commencement date, cannot be considered a Director Simpliciter to benefit from participating in the meeting of CoC. Section 45-IE (4)(a) of the RBI Act provides that upon making an order of supersession of the Board of Directors of a non-banking financial company, Director shall from the supersession of the Board of Directors vacate their offices. After vacation or removal from the office of the Director, the said person cannot claim their entitlement to participate in the CoC of the Corporate Debtor. A removed Director from the Board of Directors cannot interfere in the Company’s affairs per contra a suspended Director always remains on the erstwhile Board of the Company and assist the IRP/RP as per requirement.

“The Appellant, erstwhile Directors, who have vacated the offices are also not entitled to share any document. However, the copy of the Resolution Plan after approval from the Adjudicating Authority can not be treated as a confidential document. Therefore, after final approval of the Resolution Plan, its certified copy may be issued as per Rules,” the Tribunal said.

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