Lalit Chaturvedi & Ors. Vs. State of Uttar Pradesh & Anr. - The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money.

SCI (2024.02.06) in Lalit Chaturvedi & Ors. Vs. State of Uttar Pradesh & Anr. [SLP (Crl.) No. 13485 of 2023] held that;

• This Court, in a number of judgments, has pointed out the clear distinction between a civil wrong in the form of breach of contract, non-payment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406 of the IPC.

• To constitute an offence under section 420, there should not only be cheating, but as a consequence of such cheating, the accused should have dishonestly induced the person deceived (i) to deliver any property to any person, or (ii) to make, alter or destroy wholly or in part a valuable security (or anything signed or sealed and which is capable of being converted into a valuable security).

• The ingredient of ‘cheating’, as defined under Section 415 of the IPC, is existence of a fraudulent or dishonest intention of making initial promise or representation thereof, from the very beginning of the formation of contract.

• Section 482 of the Cr.P.C. saves the inherent power of the High Court, as it serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years, when no criminal offence is made out. 

• It is one thing to say that a case has been made out for trial and criminal proceedings should not be quashed, but another thing to say that a person must undergo a criminal trial despite the fact that no offence has been made out in the complaint.

• A criminal offence under Section 420 read with Section 415 of the IPC is not established in the absence of deception by making false and misleading representation, dishonest concealment or any other act or omission, or inducement of the complainant to deliver any property at the time of the contract(s) being entered.

• The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money.

• There are decisions which hold that the same act or transaction cannot result in an offence of cheating and criminal breach of trust simultaneously

• For the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later.

Excerpts of the order;

Leave granted. 

Heard the learned counsel for the parties. First Information Report1 No. 287/2019 for the offence(s) punishable under Sections 406 and 506 of the Indian Penal Code, 18602 was registered on 30.08.2019 with Police Station – Hapur Dehat, District – Hapur, Uttar Pradesh vide the complaint made by Sanjay Garg, who is respondent no. 2 in the present appeal. The relevant portion of the complaint, as converted into the FIR, reads as under:- 

• “Sir, it is submitted that the applicant is the proprietor/owner of the firm Garg Timber Products located in Village Patna, Police Station Hapur Dehat District Hapur, in which the applicant deals in waste wood (buying and selling of wood). From 01.12.2015 to 06.08.2017, the applicant had supplied wood waste fuel worth Rs 5,69,31,811/- along with the bill to the owner of Asar Eco Power Limited, situated at Kosi Kala Village Dotana District Mathura viz. VK Chaturvedi S/o Shri Murari Lal Chaturvedi, Mob. No. 9879211625, Address Managing Director, Asar Eco Power Limited, 630 Village Dotana NH-2 Umbrella District Mathura UP and Resident of 1402 14th Floor Lasirna CHS Limited JP Road Andheri West Mumbai 400058 and Manoj Chaturvedi Director, son of Shri Murari Lal Chaturvedi, resident of 348 Nangla Paisa Mathura Uttar Pradesh Mob. No. 9719861000 and Lalit Chaturvedi Director, Asar Eco Power Limited Kosi Kala Gram Dotana District Mathura Mob. No. 9358704070 and Mukesh Sharma Director Asar Eco Power Limited Kosi Kala Gram Dotana District Mathura Mob. No. 8859008302, for which RTGS of Rs.3,76,40,553/-was made by the above four persons. The applicant is continuously demanding the outstanding amount of Rs. 1,92,91,358/-, but the above four persons are not ready to pay the remaining amount to the applicant and there is a clear refusal and they are saying that we buy goods from people like you by lying. The above four persons, with the intention of deceiving the applicant and extorting money, purchased the wood waste dishonestly and fraudulently with the intention of benefiting themselves and causing loss to the applicant and usurped the remaining amount of Rs. 1,92,91,358/- of the Applicant. The above four persons are vicious, cunning and domineering people who are not paying the remaining amount of the applicant on the strength of their dominance and are threatening to kill if the demand is made. Due to which the applicant is quite mentally disturbed and there is a threat to his life and property from the above mentioned people. The applicant went to the police station  to file a report about this incident but the police station officials refused to take any action and register the applicant's report. Therefore, you are requested to direct the SHO, Police Station Hapur Dehat, to register the report of the applicant and take the strictest legal action against the above mentioned four people and to give the applicant's money to him. Date Sd Hindi Sanjay Garg Applicant Sanjay Garg Son of Late Shri Madanlal Garg Resident of 1899 New Pannapuri Garh Road Hapur Police Station Hapur Dehat District Hapur Mob. No. 9412218796. Note: I CC 325 Rajeev Kumar certify that the copy of the complaint was typed word for word by me on the computer.” 

After the investigation, the police has filed the charge sheet under Section 173 of the Code of Criminal Procedure, 19733, which verbatim reproduces the complaint and, thereupon, refers to the fact that the appellants, namely, Lalit Chaturvedi, Mukesh Sharma and Manoj Chaturvedi have approached the High Court of Judicature at Allahabad and obtained an order granting stay of arrest. Thereafter, it is recorded as under : - 

• “From the statement of the complainant and independent w1tnesses, it was found that the case is under Section 420 IPC and accordingly, Section 420 IPC was added. It is clear from the documents provided by the complainant and the advocate of the named accused that the named accused committed fraud and did not return Rs.19291358/- to the complainant and the complainant was threatened by the named accused Manoj Chaturvedi when he asked for the money. After thorough investigation, statement by complainant, statement by sources and in detail, crime under section 406, 420 IPC was found against all the accused and along with the above mentioned sections, a case of Section 506 IPC is also being found against Manoj Chaturvedi Chaturvedi. Therefore, charge sheet number 318/19 is presented in the court through challan. Please summon the evidence and punish the accused. The investigation is concluded.” 

This Court, in a number of judgments, has pointed out the clear distinction between a civil wrong in the form of breach of contract, non-payment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406 of the IPC. Repeated judgments of this Court, however, are somehow overlooked, and are not being applied and enforced. We will be referring to these judgments. The impugned judgment dismisses the application filed by the appellants under Section 482 of the Cr.P.C. on the ground of delay/laches and also the factum that the chargesheet had been filed on 12.12.2019. This ground and reason is also not valid. 

In “Mohammed Ibrahim and Others v. State of Bihar and Another” [(2009) 8 SCC 751], this Court had referred to Section 420 of the IPC, to observe that in order to constitute an offence under the said section, the following ingredients are to be satisfied : - 

• “18. Let us now examine whether the ingredients of an offence of cheating are made out. The essential ingredients of the offence of "cheating" are as follows: 

• (i) deception of a person either by making a false or misleading representation or by dishonest concealment or by any other act or omission; 

• (ii) fraudulent or dishonest inducement of that person to either deliver any property or to consent to the retention thereof by any person or to intentionally induce that person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived; and 

• (iii) such act or omission causing or is likely to cause damage or harm to that person in body, mind, reputation or property. 

• 19. To constitute an offence under section 420, there should not only be cheating, but as a consequence of such cheating, the accused should have dishonestly induced the person deceived (i) to deliver any property to any person, or (ii) to make, alter or destroy wholly or in part a valuable security (or anything signed or sealed and which is capable of being converted into a valuable security).” 

Similar elucidation by this Court in “V.Y. Jose and Another v. State of Gujarat and Another” [(2009) 3 SCC 78], explicitly states that a contractual dispute or breach of contract per se should not lead to initiation of a criminal proceeding. The ingredient of ‘cheating’, as defined under Section 415 of the IPC, is existence of a fraudulent or dishonest intention of making initial promise or representation thereof, from the very beginning of the formation of contract. Further, in the absence of the averments made in the complaint petition wherefrom the ingredients of the offence can be found out, the High Court should not hesitate to exercise its jurisdiction under Section 482 of the Cr.P.C. Section 482 of the Cr.P.C. saves the inherent power of the High Court, as it serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years, when no criminal offence is made out. It is one thing to say that a case has been made out for trial and criminal proceedings should not be quashed, but another thing to say that a person must undergo a criminal trial despite the fact that no offence has been made out in the complaint. This Court in V.Y.Jose (supra) placed reliance on several earlier decisions in “Hira Lal Hari Lal Bhagwati v. CBI” [(2003) 5 SCC 257], “Indian Oil Corporation v. NEPC India Ltd.” [(2006) 6 SCC 736], “Vir Prakash Sharma v. Anil Kumar Agarwal” [(2007) 7 SCC 373] and “All Cargo Movers (I) (P) Ltd. v. Dhanesh Badarmal Jain” [(2007) 14 SCC 776]. 

Having gone through the complaint, which was registered as an FIR and the assertions made therein, it is quite clear that respondent no. 2/complainant – Sanjay Garg’s grievance is regarding failure of the appellants to pay the outstanding amount, in spite of the respondent no. 2/complainant – Sanjay Garg’s repeated demands. The respondent no. 2/complainant – Sanjay Garg states that the supplies were made between the period 01.12.2015 and 06.08.2017. The appellants had made the payments from time to time of Rs. 3,76,40,553/- leaving a balance of Rs. 1,92,91,358/-. 

We will assume that the assertions made in the complaint are correct, but even then, a criminal offence under Section 420 read with Section 415 of the IPC is not established in the absence of deception by making false and misleading representation, dishonest concealment or any other act or omission, or inducement of the complainant to deliver any property at the time of the contract(s) being entered. The ingredients to allege the offence are neither stated nor can be inferred from the averments. A prayer is made to the police for recovery of money from the appellants. The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money. 

The chargesheet also refers to Section 406 of the IPC, but without pointing out how the ingredients of said section are satisfied. No details and particulars are mentioned. There are decisions which hold that the same act or transaction cannot result in an offence of cheating and criminal breach of trust simultaneously.[Wolfgang Reim and Others v. State and Another, 2012 SCC OnLine Del 3341; Mahindra and Mahindra Financial Services Ltd. and Another v. Delta Classic (P.) Ltd., (2011) 6 Gauhati Law Reports 604; Mukesh Sharma v. State of Himachal Pradesh, 2024:HHC:35.] For the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later. In this case entrustment is missing, in fact it is not even alleged. It is a case of sale of goods. The chargesheet does refer to Section 506 of the IPC relying upon the averments in the complaint. However, no details and particulars are given, when and on which date and place  the threats were given. Without the said details and particulars, it is apparent to us, that these allegations of threats etc. have been made only with an intent to activate police machinery for recovery of money. 

It is for the respondent no.2/complainant – Sanjay Garg to file a civil suit. Initiation of the criminal process for oblique purposes, is bad in law and amounts to abuse of process of law. 

In view of the aforesaid discussion, the impugned judgment is set aside and the present appeal is allowed quashing the FIR and resultant proceedings, including the chargesheet. 

We clarify that the present appeal only deals with the question of criminal offence. We have not commented or made any observations on the civil rights of respondent no. 2/complainant – Sanjay Garg. 

Pending application(s), if any, shall stand disposed of. 

.

------------------------------------------------ 

Relief on grounds outside the Pleadings

 Relief on grounds outside the Pleadings

The Hon’ble Apex Court in Union of India vs Ibrahim Uddin reported in (2012) 8 SCC 148, has held that no relief can be granted based on grounds outside the pleadings of the parties. No party can be permitted to travel beyond its pleading. In other words, it is not a matter of right that an argument made outside the pleadings should be considered. In this context we would refer the judgment rendered by the Hon’ble Apex Court in Ram Sarup Gupta (Dead) by Lrs. vs. Bishun Narain Inter College and Ors. reported in (1987) 2 SCC 555 that: 

• “6. The question which falls for consideration is whether the respondents in their written statement have raised the necessary pleading that the license was irrevocable as contemplated by Section 60(b) of the Act and, if so, is there any evidence on record to support that plea. It is well settled that in the absence of pleading, evidence, if any, produced by the parties cannot be considered. It is also equally settled that no party should be permitted to travel beyond its pleading and that all necessary and material facts should be pleaded by the party in support of the case set up by it. The object and purpose of pleading is to enable the adversary party to know the case it has to meet.” (Emphasis Added) 

Further, the Hon’ble Apex Court in Bachhaj Nahar v. Nilima Mandal, reported in (2008) 17 SCC 491 held that a case not specifically pleaded can be considered by the court unless the pleadings in substance contain the necessary averments to make out a particular case and issue has been framed on the point. In absence of pleadings, the court cannot make out a case not pleaded, suo motu. The relevant para of the judgment is reproduced in verbatim:

• “12. It is thus clear that a case not specifically pleaded can be considered by the court only where the pleadings in substance, though not in specific terms, contains the necessary averments to make out a particular case and the issues framed also generally cover the question involved and the parties proceed on the basis that such case was at issue and had led evidence thereon. As the very requirements indicate, this should be only in exceptional cases where the court is fully satisfied that the pleadings and issues generally cover the case subsequently put forward and that the parties being conscious of the issue, had led evidence on such issue. But where the court is not satisfied that such case was at issue, the question of resorting to the exception to the general rule does not arise. The principles laid down in Bhagwati Prasad and Ram Sarup Gupta (supra) referred to above and several other decisions of this Court following the same cannot be construed as diluting the well settled principle that without pleadings and issues, evidence cannot be considered to make out a new case which is not pleaded. Another aspect to be noticed, is that the court can consider such a case not specifically pleaded, only when one of the parties raises the same at the stage of arguments by contending that the pleadings and issues are sufficient to make out a particular case and that the parties proceeded on that basis and had led evidence on that case. Where neither party puts forth such a contention, the court cannot obviously make out such a case not pleaded, suo moto.” (Emphasis Added) 

---------------------------------------------

Prasada Raju M.R.V Vs. Sri. Vamsi Kambhammettu, RP. - the entire purpose of “conflict of interest” rule is to prevent and not merely to cure situations where the fair and valid discharge of one's duty can be affected by commercial interests which do not allow the fair and fearless discharge of such duties.

 NCLT Hyderabad (2024.02.06) in Prasada Raju M.R.V Vs. Sri. Vamsi Kambhammettu, RP. [I.A. No. 78 of 2023 in I.A. No. 1468 of 2022, in CP (IB) No.682/07/HDB/2018 ] held that;

• As succinctly explained by Hon’ble Supreme Court in the case of A.C. Muthiah v. Board of Control for Cricket in India, (2011) 6 SCC 617 held  that: 

- “the principle of “conflict of interest” is a much wider, equitable, legal and moral principle which seeks to prevent even the coming into existence of a future and/or potential situation which would inhibit benefit or promise through any commercial interest in which the principal actors are involved.…. the entire purpose of “conflict of interest” rule is to prevent and not merely to cure situations where the fair and valid discharge of one's duty can be affected by commercial interests which do not allow the fair and fearless discharge of such duties.” (emphasis supplied) 

• Clearly the ‘conflict of interest’ for the Applicant, who was part of the CoC in the dual capacity did not end with him being rejected as Resolution Applicant. His capacity to be an impartial observer of the CoC’s deliberations was compromised and his views on the Resolution Plan submitted by any other Resolution Applicant would necessarily have a potential of bias even after he was out of the race. 

Excerpts of the order;

# 1. The present application filed by Prasada Raju M.R.V who was a Director in the suspended Board of M/s. Mantena Laboratories Limited, the Corporate Debtor (CD) Under Section 60(5) of the IBC1 read with Rule 11 of the NCLT Rules, praying: a. To direct the Respondent to forthwith furnish the Application IA No. 1468 of 2022 and further make available all documents including Resolution Plan of Successful Resolution Applicant (SRA) received during CIRP of CD. b. To declare the Applicant as necessary party for proper adjudication of I.A. No. 1468 of 2022 and carry the amendment in cause title citing this Applicant as Respondent. c. To direct the Resolution Professional to file report on sworn affidavit along with material papers/proof confirming that he complied Regulation 39(1) and allowed Resolution Applicants to modify plan one time during CIRP. Submissions of Applicant: 

# 2. The CD was admitted into CIRP2 by this Adjudicating Authority vide orders dated 06.08.2021, where the Respondent herein was appointed as Interim Resolution Professional (IRP) and later CoC3 appointed him as Resolution Professional (RP). 

# 3. The Respondent had issued public announcement and taken control over the assets of CD as under law and constituted CoC as contemplated under section 21 of the Code. The Applicant claims to have provided all the information to Respondent about stock, intermediaries, raw materials and finished goods etc worth above 13 Crores. It is further contented that the Respondent committed a material irregularity in omitting stocks worth 13 Crores while ascertaining the marketable value and liquidation value of CD. 

# 4. Respondent had published Form-G on 24.11.2021 and received EoI from five members/Company. The CD being MSME in nature, the Applicant had also submitted a Resolution Plan as per the terms of RFRP4 to revive CD, but it was rejected by the CoC on 03.12.2022. 

# 5. It is asserted by the Applicant that the Respondent had allowed Resolution Applicants (RAs) to modify Resolution Plans on multiple occasions, which he claims is evident from 9th CoC meeting to place final modified Resolution Plan before the CoC for calling voting rights within timelines from 11.03.2022 to 26.03.2022. 

# 6. It is submitted that the Applicant has participated in 10th CoC meeting. The Respondent however did not share the minutes of the meeting till date to the Applicant which is a material irregularity committed by the Resolution Professional. 

# 7. It is contended that the RP is obligated to attach all the documents, including Resolution Plans, to the CoC notice sent to the Applicant. Contrary to the same, it is stated, that the Respondent RP did not serve documents along with CoC notice to the Applicant and committed material irregularity. The Applicant being a competing RA had not made any demand to RP to forward the Resolution Plan so long as the CoC was carrying deliberations on plans with RAs. 

# 8. The Applicant has referred to the case Vijay Kumar Jain Vs. Standard Chartered Bank decided by Hon’ble Apex Court (without any citation), wherein according to the Applicant, in at Para No. 12, 16, 17 and 18, it was held:

• “12. Section 60(5)(c) is also very wide, and a member of the erstwhile Board of Directors also has an independent right to approach the Adjudicating Authority, which must then hear such person before it is satisfied that such resolution plan can pass muster under Section 31 of the Code.” 

• “16. The argument on behalf of the committee of creditors based on the proviso to Section 21(2) is also misconceived. The proviso to Section 21(2) clarifies that a director who is also a financial creditor who is a related party of the corporate debtor shall not have any right of representation, participation, or voting in a meeting of the committee of creditors. Directors, simplicitor, are not the subject matter of the proviso to Section 21(2), but only directors who are related parties of the corporate debtor. It is only such persons who do not have any right of representation, participation, or voting in a meeting of the committee of creditors. Therefore, the contention that a director simplicitor would have the right to get documents as against a director who is a financial creditor is not an argument that is based on the proviso to Section 21(2), correctly read, as it refers only to a financial creditor who is a related party of the corporate debtor. For this reason, this argument also must be rejected”

• “17. We may also mention in passing that the Bankruptcy Law Committee Report of November, 2015 stated: “II. The Code will enable symmetry of information between creditors and debtors. 5. The law must ensure that information that is essential for the insolvency and the bankruptcy resolution process is created and available when it is required. 6. The law must ensure that access to this information is made available to all creditors to the enterprise, either directly or through the regulated professional. 7. The law must enable access to this information to third parties who can participate in the resolution process, through the regulated professional.” Paragraph II (7) correctly reflects the reason for Section 24(3)(b) of the Code.” 

• “18. We may indicate that the time that has been utilized in these proceedings must be excluded from the period of the resolution process of the corporate debtor as has been held in Arcelormittal India Private Limited v. Satish Kumar Gupta & Ors., Civil Appeal Nos. 9402-9405/2018 [decided on 04.10.2018] (at paragraph 83). In each of these cases, the appellants will be given copies of all resolution plans submitted to the CoC within a period of two weeks from the date of this judgment. The resolution applicant in each of these cases will then convene a meeting of the CoC within two weeks thereafter, which will include the appellants as participants. The CoC will then deliberate on the resolution plans afresh and either reject them or approve of them with the requisite majority, after which, the further procedure detailed in the Code and the Regulations will be followed. For all these reasons, we are of the view that the petition and appeal must be allowed and the NCLAT judgment set aside.” 

# 9. Ld. Counsel has also referred to one judgement of Ho’ble NCLAT in the case of Saravana Global Holdings Ltd. v. Bafna Pharmaceuticals Ltd., 2019 SCC OnLine NCLAT 962, to argue that for the Applicant who was the promoter of the CD which is an MSME, it was not necessary to compete with other Resolution Applicants to regain control of the CD. The following part of that judgement was quoted, 

• “in exceptional circumstances, if the ‘Corporate Debtor’ is MSME, it is not necessary for the Promoters to compete with other ‘Resolution Applicants’ to regain the control of the ‘Corporate Debtor” 

On the basis of afore said judgement, it is contended that the Applicant being a Post Graduate in Organic Chemistry and having an experience of more than 20 years in the Pharma Industry and the person who has introduced several lifesaving drugs, is such exceptional circumstance, in which it should not have been necessary for him to compete with other RAs. 

# 10. During the hearing, the Ld. Counsel of the Applicant fairly conceded that the Applicant's dual role as both, a Resolution Applicant and a part of the suspended management, presented a conflict of interest so far as the deliberations of CoC were concerned. However, it was argued that since the Applicant's Resolution Plan had been rejected, any conflict of interest no longer remained and he should have been given access to all Resolution Plans to demonstrate alleged procedural violations by the Respondent RP. 

# 11. It has been thus contended that the Applicant is just and necessary party to IA No. 1468 of 2022, through which the Resolution Plan adopted by the CoC has been placed before this Tribunal for approval, and that he should be allowed access to the Resolution Plans submitted by other Resolution Applicants. 

The Counter: 

# 12. It is submitted by the Respondent RP that the order dated 06.08.2021 passed by this Adjudicating Authority admitting the CD under CIRP attained finality through the order of dismissal dated 28.11.2022 passed by Hon’ble Supreme Court in Civil Appeal No. 2550 of 2022 filed by the Applicant. It is submitted that the Applicant is a litigious person and has at every stage tried to stall CIRP of the CD by filing multiple litigations. He has not been providing information and resorting to non-cooperation. 

# 13. It is asserted that the Resolution Plan was approved by the CoC by 79.41% votes and therefore the RP preferred application under section 30(6) of the IBC which is pending approval by this Adjudicating Authority.

# 14. The Respondent denies the averment made by the Applicant regarding stock, intermediaries, and raw material worth 13 Crores as the Applicant never submitted any details regarding the same. The Respondent RP has categorically denied having committed any irregularity concerning the finished stock, intermediaries or the raw material, and that the valuation of the CD’s assets was conducted as per Regulation 35 of CIRP Regulations by the Registered Valuer as approved by the CoC. 

# 15. Respondent has also denied that he had allowed RAs to modify Resolution Plans on multiple occasions. It is stated that two Resolution Plans were received by him, which were placed before the CoC for examination. The CoC was also appraised about the regulations, and the CoC, as per the said regulations, permitted modification of the Resolution Plan only once to both the RAs including the Applicant herein. Case of Vistra7 was cited to argue that “the CoC retain its jurisdiction to negotiate with one or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP. Regulation 39(1A) cannot be read as a fetter on the powers of the CoC to discuss and deliberate and take further steps of negotiations with the Resolution Applicants”. It was claimed therefore, that the CoC did nothing that was not permissible under the law. 

# 16. It is averred that the case of Vijay Kumar Jain Vs. Standard Chartered Bank relied on by the Applicant is factually different and does not apply to the present Applicant. It is contended that the CD being MSME, the Applicant, who was a promoter/director of the CD, was permitted to submit a Resolution Plan. Therefore, he was participating in CoC meeting in dual capacity as part of the suspended management and also as a Resolution Applicant. During the proceedings relating to verification and examination of the Resolution Plans, the same being confidential, the CoC informed the Applicant to exit the meeting and there after permitted him to rejoin. 

# 17. The Respondent further denied that serious prejudice will be caused to the Applicant if Respondent does not share the copy of IA No. 1468/2023. 

Decision: 

# 18. Through this application, the Applicant essentially seeks access to the Resolution Plans submitted by the other Resolution Applicants. To this end, he has relied upon the judgment of Vijay Kumar Jain Vs. Standard Chartered Bank” to claim that as per the decision of Hon’ble Supreme Court in this case, he is entitled to the records of all the deliberations of the CoC, including all Resolution Plans considered by it. 

# 19. It is a fact that the Applicant has a dual role in this case. Besides being part of the suspended Board, he is also one of the Resolution Applicants. As part of the suspended Board, he was given notices of the CoC meetings as required under section 24(3)(b) of IBC. He was also allowed to attend these meetings, except when the CoC was considering Resolution Plans. 

# 20. However, the role of the Applicant as ‘Resolution Applicant’ is circumscribed. Under section 30(5) of IBC, “the resolution applicant may attend the meeting of the committee of creditors in which resolution plan of the applicant is considered”. It clearly follows that a Resolution Applicant can attend CoC meeting only in respect of the plan that was submitted by him, and will have no access to the Resolution Plans submitted by others. 

# 21. The cited case law of Vijay Kumar Jain Vs. Standard Chartered Bank also does not support the Applicant's argument. That case dealt with the eligibility of a former director who, being an unrelated financial creditor of the CD, sought access to CoC meetings and Resolution Plans submitted by Prospective Resolution Applicants. The Apex Court decision in that case affirmed the right of such individuals to attend CoC meetings and access Resolution Plans. However, that judgment will not apply to a suspended promoter/director who is also a Resolution Applicant. 

# 22. In the present case, not only the Applicant is related to the CD, being a promoter/director, he is also a Resolution Applicant. The CD being the MSME, he was permitted to submit a Resolution Plan. However, he was rightly kept out by the CoC from the proceedings of examination and evaluation of the Resolution Plans submitted by other Resolution Applicants. 

# 23. We are also not persuaded by the argument of the Ld Counsel for the Applicant that, after the Applicant’s plan was rejected by the CoC the conflict of interest does not survive and he should have been allowed access to all deliberations of the CoC including the Resolution Plans submitted by other Resolution Applicants. 

# 24. As succinctly explained by Hon’ble Supreme Court in the case of A.C. Muthiah v. Board of Control for Cricket in India, (2011) 6 SCC 617 held  that: 

• “the principle of “conflict of interest” is a much wider, equitable, legal and moral principle which seeks to prevent even the coming into existence of a future and/or potential situation which would inhibit benefit or promise through any commercial interest in which the principal actors are involved.…. the entire purpose of “conflict of interest” rule is to prevent and not merely to cure situations where the fair and valid discharge of one's duty can be affected by commercial interests which do not allow the fair and fearless discharge of such duties.” (emphasis supplied) 

Clearly the ‘conflict of interest’ for the Applicant, who was part of the CoC in the dual capacity did not end with him being rejected as Resolution Applicant. His capacity to be an impartial observer of the CoC’s deliberations was compromised and his views on the Resolution Plan submitted by any other Resolution Applicant would necessarily have a potential of bias even after he was out of the race. 

# 25. The other argument of the Ld. Counsel that being an expert in the field of pharmaceuticals, the Applicant presents those ‘exceptional circumstances’ in which it should have not been considered necessary for him to even compete with other Resolution Applicants, is also not convincing. Firstly, in this application, this is not the relief that the Applicant has sought, as he has already competed with other Resolution Applicants. Secondly, it is his “expertise” in managing the affairs of the CD which has resulted in the present state of affairs. If he was so exceptional, he would not have run a debt of more than Rs 127 crores which the CD was neither able to service nor repay, and was to be admitted into CIRP. 

# 26. About the allegations of the Resolution Applicants being allowed to modify the plan more than once, and thus violative of the Law, is the matter to be examined by this authority while examining IA No. 1468/2023, through which the successful Resolution Plan has been presented. As held earlier, the Applicant has no locus-standi in that application. 

# 27. Applicant being an unsuccessful Resolution Applicant is not a necessary party for the approval of a Resolution Plan. Once the CoC has endorsed a Plan by requisite percentage of voting share, it is only for this Authority to adjudicate thereon and approve it under the provisions of IBC. For the reasons as above, this application is dismissed. 

------------------------------------------------