NCLAT Upholds Denial of Access to Rejected Valuation Reports, Affirms Distinction Between CoC Members and Participants [Read Order]

In a recent ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, dismissed an appeal by Manish Bagrodia, an ex-director of Winsome Yarns Limited, upholding a National Company Law Tribunal (NCLT) order that denied him access to the first set of valuation reports.

NCLAT held that there is a clear distinction between 'members' of the Committee of Creditors (CoC) and 'participants' like suspended directors, with access to confidential reports being limited to the former.

The appeal challenged the NCLT, Chandigarh Bench's order dated 16.05.2025, which had dismissed an application (IA No. 1935 of 2024) filed by the suspended management seeking access to two initial valuation reports that were later rejected by the CoC.

Counsel for the appellant contended that the denial of access to these integral reports and his exclusion from parts of the CoC meetings violated his statutory rights under Section 24 of the Insolvency and Bankruptcy Code (IBC). Relying on the Supreme Court's decision in Vijay Kumar Jain vs. Standard and Chartered Bank, it was submitted that as a participant, he was entitled to parity in access to all documents relevant to the resolution process.

Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here

A bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member, Technical) observed that the CoC, exercising its commercial wisdom, had found the initial valuation reports to be 'high-pitched' and had subsequently rejected them, appointing new valuers. The Tribunal noted that the appellant was only asked to leave the meeting during the confidential discussion of these specific, rejected reports and was allowed to participate in all other deliberations, including those on the resolution plans.

The NCLAT found that Regulation 35(2) of the CIRP Regulations mandates that valuation reports be shared only with 'members of the committee' the financial creditors and not with 'participants' like the suspended director. The Tribunal viewed that since the first set of reports had been discarded by the CoC and were no longer relevant to the process, insisting on them was an attempt to derail the CIRP and lacked legal basis.

The NCLAT dismissed the appeal, finding it devoid of merit. The Tribunal upheld the impugned order, affirming that the right to participate does not extend to accessing rejected and confidential documents not under the CoC's consideration.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates