Chandra Kant Khemka, vs Mr. Pratim Bayal & Anr. - It is also well settled that a suspended Board of Directors is not rendered completely remediless and may invoke the jurisdiction of this Hon’ble Adjudicating Authority under Section 60(5) in appropriate cases, especially where the case is related to conduct of the CIRP, preservation of assets, or violation of statutory duties by the RP or CoC.

 NCLT Kolkata (2026.05.04) in Chandra Kant Khemka, vs Mr. Pratim Bayal & Anr. [A (IB) No. 212/KB/2025 And IA (IB) No. 1446/KB/2025 In CP (IB) No. 1377/KB/2020 ] held that;

• It is also well settled that a suspended Board of Directors is not rendered completely remediless and may invoke the jurisdiction of this Hon’ble Adjudicating Authority under Section 60(5) in appropriate cases, especially where the case is related to conduct of the CIRP, preservation of assets, or violation of statutory duties by the RP or CoC.

• In the case of Vijay Kumar Jain vs. Standard Chartered Bank and Ors. (31.01.2019 - SC) the Hon'ble Supreme Court recognized the right of members of the suspended Board of Directors of a corporate debtor to receive insolvency resolution plans submitted before the Resolution Professional, in order to effectively participate in the meetings of Committee of Creditors (CoC).

• Further in the case of Anand Kariwala v. Mr. Partha Pratim Ghosh RP, (2022) ibclaw.in 178 NCLT, it was held that although the powers of the suspended Board of Directors of a Corporate Debtor are suspended under Section 17(1)(b) of the I&B Code and their function is limited to assisting and cooperating with the Resolution Professional (RP), but they are not barred from objecting to the acts of the RP if such acts are prejudicial to the Corporate Debtor or violate any law or procedural requirement.

Excerpts of the Order;

IA (IB) No. 212/KB/2025

# 1. The Court convened in hybrid mode.

# 2. Heard Ld. Counsels for the parties.

# 3. The IA (IB) 212/KB/2025 has been preferred under Section 60(5) of the I&B Code, by Mr. Chandra Kant Khemka, one of the Directors of the suspended Board of Directors of Nandini Impex Private Limited (CD), which is currently undergoing CIRP against the Committee of Creditors of Nandini Impex Private Limited (CD) to seek the following reliefs:

• “a. A fit and proper person be appointed as Receiver to take charge of the assets and properties of the Corporate Debtor:

• b. An Order directing the Learned Receiver so appointed to make an inventory of the machineries and equipment of the Corporate Debtor lying in the sites mentioned in paragraph 11 above and to furnish a Report on the status of the same within a period of two (2) weeks or within such time as this Hon'ble Tribunal may deem fit and proper;

• c. An Order be passed directing the Respondent No. 1/CoC to forthwith disburse funds to the Learned Receiver for the purpose of making payment of the pending wages and salaries of the employees and workers of the Corporate Debtor;

• d. An order directing the Learned Receiver to make payment of the pending wages and salaries of the employees and workers of the Corporate Debtor upon receiving the same from the Respondent No. 1/CoC;

• e. An Order be passed directing the Respondent No. 1/CoC to forthwith disburse funds to the Learned Receiver for the purpose of making payment of the arrears of rent due and owing to the landowners and yard owners at Najafgarh, Panchkula, Balasore and Bhubaneswar;

• f. An Order be passed directing the Receiver to forthwith make payment of the arrears of rent due and owing to the landowners and yard owners at Najafgarh, Panchkula, Balasore and Bhubaneswar upon receiving the same from the Respondent No. 1/CoC;

• g. Such further or other order or orders and/or direction or directions be passed as this Hon'ble Tribunal may deem fit and proper.”

# 4. Factual Matrix:

4.1. The Applicant, Mr. Chandra Kant Khemka, one of the Directors of the suspended Board of Directors of Nandini Impex Private Limited (CD), which is currently undergoing CIRP.

4.2. The Respondent No. 1, UCO Bank, is the sole member of the COC of the CD currently undergoing CIRP.

4.3. The CD was admitted into CIRP, moratorium was declared on the CD in terms of Section 14 of the I&B Code and Mr. Santanu Bhattacharjee was appointed as the RP of the CD vide an order dated 20.09.2022.

4.4. The Applicant being aggrieved by the inactions on the part of the Respondent No. 1 preferred the application under Section 60(5) of the I&B Code, 2016, to ensure that there is no further depletion in the value of assets of the CD at the hands of the R1.

 

# 5. Submissions of the Applicant:

5.1. It is submitted that the R1 has failed to take steps to protect and preserve the value of the CD and keep it as a going concern, and also contributed to the depletion of the assets of the CD.

5.2. It is submitted that even after 2.5 years passed since the order of admission, there has been no resolution forthcoming for the CD primarily due to the mode and manner by which the CIRP of the CD has been conducted at the behest of the R1.

5.3. It is further submitted that the wages and salaries of the staff, workers, and employees of the CD have not been paid since 11 months which has adversely impacted the operations of the CD and they have expressed their deep anguish at the miserable affairs of the CD.

5.4. It is submitted that this Hon’ble Tribunal had by an order dated 30.09.2024 specifically directed the R1 to provide funds for making payment of salaries and wages to the workers and employees, and the said order was communicated by the RP and Agenda No. 5 of the Minutes of the 15 COC meetings convened on 28.10.2024 specifically records it, but the R1 had failed to comply with such directions.

5.5. It is further submitted that the Applicant has been informed that the rent for the equipment store locations remain unpaid for several months and in some cases for more than a year.

5.6. Further that during the hearing of the instant petition on or about 07.01.2025, it came to the knowledge of the Applicant that the RP of the CD has resigned, but no intimation or reasons were provided for such resignation, and even after a lapse of substantial period of time, the R1 has failed to take any step for the replacement of the RP.

5.7. It is submitted that the untimely resignation of the RP of the CD has come at a crucial time in respect of the affairs of the CD since it was executing the balance pipeline works for IOCL at the West Bengal/Odisha border and the RP along with the Applicant were due to hold vital discussions with the IOCL regarding such work in December itself.

5.8. Further that the machineries and equipment of the CD are in a defunct condition at the diverse sites of the CD due to non-maintenance of the same and some equipments are lying in various locations unsheltered from the rain, resulting in rapid wear and tear.

5.9. It is alleged that the inactions on the part of R1 in preserving the machineries and equipment of the CD have severely depreciated and depleted the overall value of the assets of the CD.

5.10. Further that the falling value of the assets of the CD vitally affects the Applicant as the Applicant will have to ultimately bear the brunt of a failed resolution, which is clearly attributable to the erring conduct of the R1.

5.11. It is contended that the issue regarding the non payment of dues of the workers and diminishing value of the machines and equipment were raised by the Applicant in the 17th meeting of the COC of the CD that took place on 24.03.2025,

5.12. Further that the R1 by its wrongful conduct is acting against the interests of the CD and is causing tremendous loss to the value of the assets of the CD.

# 6. Submissions of the Respondent:

6.1. Per contra, the Ld. Counsels for the Respondent would submit that the present application is not maintainable as the Applicant has no locus to file the instant petition.

6.2. It is submitted that the role of the suspended BOD is very restricted after the CIRP commences and he is required to provide all the information, documents to the RP and is required to assist the RP in any way in the CIRP, and apart from this the suspended member of the CD does not have any other locus in the CIRP of the CD.

6.3. It is further submitted that the order dated 30.09.2025 was passed in the absence of the COC, and the order provides that “COC members may provide funds accordingly” to mean that the funds which are approved by the COC shall be paid to the new incoming RP after his appointment, and therefore denied that there was any ‘specific direction’ on COC to make the payments.

6.4. It is submitted further that the COC needs details of the statements/accounts on the income and expenditure of the funds of the CD during the CIRP period and also of the funds available as on the CIRP admission date. The justified costs shall be approved and paid by the CoC to the Resolution Professional (RP), and not the costs merely based on the statement of the suspended Board.

 

I.A. (IB) No. 1446/KB/2025

7. The IA (IB) 1446/KB/2025 under Section 60(5) of the I&B Code has been preferred by Mr. Chandra Kant Khemka, one of the Directors of the suspended Board of Directors of Nandini Impex Private Limited (CD), which is currently undergoing CIRP to seek the following reliefs:

• “a. Declaration that the Corporate Insolvency Resolution Process has depleted the value of the Corporate Debtor by causing loss calculated at Rs. 500 Crores on and from September, 2022 till date,

• b. Direction be passed on the Resolution Professional to forthwith file an affidavit, inter-alia, disclosing the present status of the steps taken by him to visit the sites of the Corporate Debtor where the assets and equipment are lying:

• c. Direction be passed on the Resolution Professional to forthwith file an affidavit, inter-alia, disclosing the steps taken by him in resolving the issues with the IOCL;

• d. Direction be passed on the Resolution Professional to forthwith provide a copy of the Information Memorandum to the Applicant;

• e. Stay of the CIRP pending disposal of the present application;

• f. Such further or other order or orders and/or direction or directions be passed as this Hon'ble Tribunal may deem fit and proper.”

# 8. Submissions of the Applicant:

8.1. It is submitted that the R2 belatedly sprang into action for the first time on or about February, 2025 by appointing the R1, Pratim Bayal, as the RP, upon apprehending that the prayers made in the IA No. 2029 of 2025 would be allowed and a Special Officer would be appointed to oversee the CIRP.

8.2. It is submitted that at the 16th COC meeting held on 06.03.2025, the RP assured the Applicant that he would prioritize the payment of the staff’s wages, but the payments were made in a whimsical and arbitrary manner as on July, 2025, a sum of Rs. 48,26,102/- was due towards unpaid salaries and wages.

8.3. It is further submitted that the RP has failed to take control and custody of the CD’s machinery and equipment lying at several locations despite repeated requests and reminders by the Applicant.

8.4. It is further submitted that the Applicant has urged the RP in several COC meetings to take possession of the assets of the CD or at least conduct an inspection of the said assets, as the last valuation was done in early 2023, but all such requests went in vain.

8.5. It is further submitted that the RP has not taken control and custody of the Najafgarh and Panchkula sites, wherein several plants and machinery of the CD are lying.

8.6. It is further submitted that the RP and the COC have proceeded to approve a resolution plan based on a valuation which does not take into account the present value of the CD’s assets, particularly the sites wherein the RP is yet to take control or custody, and thus failed to take measures to preserve the CD’s status as a going concern or maximization of the assets of the CD.

8.7. It is further submitted that the RP conducted a desktop valuation of the said sites due to its inability to access them, without seeking police assistance from this Hon’ble Tribunal for taking control and custody of the sites at an earlier stage of CIRP.

8.8. It is further submitted that the COC’s refusal to disburse funds to enable the RP to clear the outstanding rent has led to constant depletion and deterioration of the CD’s assets. Further, several assets have been stolen from the Haryana site as well.

8.9. It is further submitted that although the RP was duty-bound to ensure that the CD is run as a going concern, no steps have been taken by the RP to achieve the same or to ensure that fresh EPC contracts are awarded to the CD. In fact, the existing business relationship with IOCL has been jeopardised, and the CD has been holiday-listed by IOCL for a period of two years.

8.10. It is further submitted that though the RP in his reply affidavit has admitted that the resolution plan is yet to be approved by this Hon’ble Tribunal, the RP has already delegated the resolution of disputes with IOCL to the SRA’s representative.

8.11. It is further submitted that the negligence and failure on the part of the COC and the RP have led to depletion and erosion of the CD’s assets, and the CD has further incurred loss to the extent of Rs. 500 crores.

8.12. It is further submitted that the Applicant’s liability qua the purported personal guarantor will substantially increase due to approval of a resolution plan, which is based on a valuation conducted in 2023, due to non-accessibility of the Najafgarh and Panchkula sites.

# 9. Submissions of the Respondents:

9.1. Submission of Respondent No. 1:

9.1.1. Per contra, the ld. Counsel for the Respondent 1 would submit that upon his appointment, he undertook a detailed assessment of the financial and operational condition of the CD, reviewed the records of the CD that included a salary liability register, and found out that a significant portion of the workforce, constituting nearly 70% of the employee base as unutilised and not engaged in any productive or revenue generating functions.

9.1.2. That the R1 initiated several corrective measures, including rationalisation of employee strength, reduction of salary expenditure, and efforts to secure access to certain storage sites where machinery of the CD was locked and remained inaccessible.

9.1.3. It is submitted that the COC had also deliberated upon reduction of employees, considering the fact that the CD was not carrying any active business operations, and the majority of employees were not rendering any meaningful services, and in the absence of any cash flow of the CD, such continuation would impose undue and avoidable financial burden on the COC by way of salary and related payments.

9.1.4. That after a detailed deliberation between the COC members and the RP, in the presence of the BOD, the salary structure of the employees/workmen was found to be disproportionately high and accordingly the COC resolved to reduce the salaries of certain employees to a reasonable level commensurate with limited operational requirements of the CD and in consonance with the principle of value maximisation enshrined under Section 20(2)(e) and Section 25 of the I&B Code, 2016.

9.1.5. It is submitted that non-payment of salary beyond 30.09.2024 is not attributable to any inaction on the part of the R1, but arises solely on account of absence of work and deliberate non-cooperation by certain employees.

9.1.6. It is further submitted that in compliance with the order dated 30.09.2024 passed by this Adjudicating Authority, the R1 has already disbursed sums towards employees’ salaries and wages, and any inflated or unsubstantiated claims cannot be recognised as CIRP costs.

9.1.7. It is further contended that, though substantial rent has been paid, access to key asset sites at Najafgarh and Panchkula has been obstructed due to the non-cooperation and hostile conduct of landlords.

9.1.8. It is further submitted that to safeguard other assets, partial rent has been paid, and funding has been sought from the CoC.

9.1.9. Further that the corporate debtor was placed on a holiday list of IOCL due to pre-CIRP contractual breaches by the suspended BOD, and the RP conducted meetings with IOCL, which resulted in temporary relief and extension of time for completion of work.

9.1.10. That the delays and disputes between IOCL and the CD arose due to mismanagement and unauthorized subcontracting by the suspended Board of Directors, and not due to any lapse on the part of the RP.

9.1.11. That the IM has been duly updated from time to time and the same has been duly shared with the prospective RA as required by the I&B Code, 2016.

9.1.12. It is therefore alleged that the present application is misconceived, mala fide, and an abuse of the process of law, and is motivated by extraneous and personal considerations with the intent to exert undue pressure on the Committee of Creditors (COC) and the RP by misrepresenting facts and inflating the cost structure with the sole objective of delaying and obstructing the CIRP.

9.2. Submission of Respondent No. 2:

9.2.1. Ld. Counsels for the R2 submitted that the present application is not maintainable and challenged the locus standi of the Applicant/SBOD to file this instant application.

9.2.2. It is submitted that the order dated 30.09.2024 was passed in the absence of the COC, and the COC is not bound and will not pay whatever figures are stated by the Applicant as unpaid wages.

9.2.3. It is further submitted that there was no depletion of assets of the CD as the CD did not have any contract and assets from the starting day of the CIRP.

# 10. Analysis and Findings:

10.1. We heard the parties and perused the records.

10.2. Upon consideration of the pleadings, documents and rival submissions, the main issue that arises for determination is:

• 10.2.1. Whether the present application is maintainable at the instance of one of the erstwhile director who is part of the SBOD of the CD?

• 10.2.2. Whether there has been failure on the part of the Committee of Creditors (CoC) and the Resolution Professional (RP) in preserving and maximising the value of the assets of the CD?

I. Whether the present application is maintainable at the instance of one of the erstwhile director, who is part of the SBOD of the CD?

10.3. It is not in dispute that upon commencement of the Corporate Insolvency Resolution Process (CIRP), the powers of the Board of Directors stand suspended and vest in the Interim Resolution Professional/Resolution Professional in terms of Section 17 of the I&B Code, and the role of the suspended Board of Directors is limited to cooperation and assistance to the RP.

10.4. It is also well settled that a suspended Board of Directors is not rendered completely remediless and may invoke the jurisdiction of this Hon’ble Adjudicating Authority under Section 60(5) in appropriate cases, especially where the case is related to conduct of the CIRP, preservation of assets, or violation of statutory duties by the RP or CoC.

10.5. In the case of Vijay Kumar Jain vs. Standard Chartered Bank and Ors. (31.01.2019 - SC) the Hon'ble Supreme Court recognized the right of members of the suspended Board of Directors of a corporate debtor to receive insolvency resolution plans submitted before the Resolution Professional, in order to effectively participate in the meetings of Committee of Creditors (CoC).

10.6. Further in the case of Anand Kariwala v. Mr. Partha Pratim Ghosh RP, (2022) ibclaw.in 178 NCLT, it was held that although the powers of the suspended Board of Directors of a Corporate Debtor are suspended under Section 17(1)(b) of the I&B Code and their function is limited to assisting and cooperating with the Resolution Professional (RP), but they are not barred from objecting to the acts of the RP if such acts are prejudicial to the Corporate Debtor or violate any law or procedural requirement.

10.7. Therefore, the objection of the Respondent that the SBOD does not have locus to maintain the Application is not sustainable in law.

II. Whether there has been failure on the part of the Committee of Creditors (CoC) and the Resolution Professional (RP) in preserving and maximising the value of the assets of the CD?

10.8. Section 20 and 25 of I&B Code, 2016 mandate that the RP shall preserve and protect the assets of the Corporate Debtor and manage its operations as a going concern.

10.9. The COC though guided by the commercial wisdom is expected to take decisions that further the objectives of value maximisation of the wealth of the CD.

10.10. It is observed that certain key asset locations, including Najafgarh and Panchkula, remained beyond the effective control and custody of the RP due to landlord obstruction and access-related disputes.

10.11. The RP is expected to act promptly and take necessary legal steps, such as approaching this Tribunal to seek police assistance and safeguard the assets of the CD.

10.12. It is observed that the record does not conclusively establish wilful negligence or mala fide conduct

10.13. It is observed that the alleged depletion of value and erosion of assets of CD to the extent of Rs. 500 crores is not substantiated and involves complex factual and financial assessment, including valuation metrics, market conditions, operational viability and many others.

10.14. Further, the record does not conclusively establish wilful negligence or mala fide conduct on the part of the COC or the RP, and any diminution or depletion in value of assets of the CD cannot be attributed solely on account of delay or operational challenges.

11. Order:

11.1. In view of the foregoing discussions, the RP is directed to take steps within a period of 2 weeks, including taking police assistance if necessary, to secure access to all sites, where the assets of the CD are located and shall conduct a physical inspection of all accessible assets and prepare a comprehensive report on the same and furnish it to this Tribunal within a period of 4 weeks.

11.2. The RP shall place complete and verified details of outstanding wages/salaries, outstanding rents of assets of the CD before the COC and the COC shall consider and take a reasoned decision on this matter.

11.3. The IA (IB) No. 212/KB/2025 and IA (IB) 1446/KB/2025 thus stand partly allowed and disposed of.

# 12. The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

# 13. Certified Copy of this order may be issued, if applied for, upon compliance with all requisite formalities.

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HDFC Bank Ltd. vs Opto Circuits (India) Ltd. (RP) - The IBC, 2016, imposes positive obligations upon the RP under Sections 18 and 25 to preserve and maximize the value of the assets of the Corporate Debtor, including its investments in subsidiaries. In this regard, the conduct of the RP falls short of the statutory mandate. It is not sufficient for the RP to passively record non-cooperation; proactive and legally sanctioned steps needed to be taken to enforce compliance with the orders of this Tribunal.

 NCLT Bengaluru (2025.07.29) in HDFC Bank Ltd. vs Opto Circuits (India) Ltd. (RP)  [(2025) ibclaw.in 1148 NCLT, I.A. No. 433 of 2024 in C.P. (IB) No. 199/BB/2018] held that;

• The IBC, 2016, imposes positive obligations upon the RP under Sections 18 and 25 to preserve and maximize the value of the assets of the Corporate Debtor, including its investments in subsidiaries. In this regard, the conduct of the RP falls short of the statutory mandate. It is not sufficient for the RP to passively record non-cooperation; proactive and legally sanctioned steps needed to be taken to enforce compliance with the orders of this Tribunal.

• This Authority is of the considered view that the conduct of the RP warrants a reference to the IBBI for further scrutiny under its disciplinary framework. It is also pertinent to note that disciplinary proceedings are already pending against the same RP in another matter. This lends further credence to the need for regulatory intervention to examine whether the RP remains fit and proper to discharge duties and responsibilities under the Code.

Excerpts of the Order;

# 1. The present Application has been filed by the Applicant, under Rule 11 of the NCLT Rules, 2016 with following prayers:

• a. conducting a fresh valuation of the subsidiaries and step-down subsidiaries of the Corporate Debtor; and

• b. deferring the consideration of the approved resolution plan pending the said valuation.

# 2. Facts of the case:

a. The Corporate Debtor, incorporated on 08.06.1992, is engaged in the manufacture of medical devices and has its registered office at Plot No. 83, Electronics City, Bengaluru –560100. As part of its business model, it made substantial investments in various domestic and overseas subsidiaries and step-down subsidiaries which hold valuable intellectual property rights (IPRs).

b. Pursuant to a petition filed by ICICI Bank Ltd. under Section 7 of the Insolvency & Bankruptcy Code, CIRP was initiated against the Corporate Debtor by an order dated 16.11.2022, and Sh. Pankaj Srivastava was appointed its Interim Resolution Professional (IRP). Subsequently, the Respondent was confirmed as the Resolution Professional (RP) in the 1st CoC meeting of corporate debtor held on 03.01.2023.

c. The Information Memorandum (IM) and an Addendum thereto were issued by the RP, disclosing investments in subsidiaries and IPRs. Two Registered Valuers were appointed in the 2nd CoC meeting for determining fair and liquidation values. The Applicant’s claim for ₹267.53 crores was partly admitted for ₹179.03 crores, and it was inducted into the CoC with a 7.40% voting share.

d. The Suspended Board of Directors failed to provide necessary information and documents, particularly regarding subsidiaries and step-down subsidiaries. The RP filed an I.A. 260/2023 under Section 19(2) of the Code, and by order dated 01.05.2023 the Suspended Directors were directed to cooperate and provide all requisite documents to RP (hereinafter “19(2) Order”).

e. The Suspended Directors did not fully comply with the 19(2) Order. The RP received two resolution plans from Prospective Resolution Applicants (PRAs), namely Mr. Navneet Garg and Agam Pulp & Paper Pvt. Ltd. but these were affected by the lack of data regarding subsidiaries.

f. Subsequent CoC meetings recorded the persistent non-cooperation by Suspended Directors and the consequent inability of PRAs to value the subsidiaries. A White Paper prepared by the RP acknowledged the non-availability of data and the resultant undervaluation of assets. The CoC resolved to appoint an External Valuer (Priyanka Sharma & Associates) in its 12th meeting. 

g. The final report submitted by the Valuer placed the Fair and Liquidation Values of subsidiaries of corporate debtor at ₹13.35 crores and ₹9.35 crores respectively, but noted major limitations due to lack of financial statements and projections.

h. Despite discussions across multiple CoC meetings and resolutions to initiate contempt against the Suspended Directors, no such application was filed by the RP. The CoC, in the 26th Meeting, approved the resolution plan of Mr. Saikam Sivachaitanya by a 66.53% majority. The Applicant HDFC Bank had abstained from voting.

# 3. Submissions of the Petitioner/Applicant:

The application has been filed on the following grounds:

a. the valuation of the Corporate Debtor, pegged at a mere INR 40 crores against an admitted debt of approximately INR 2300 crores, is premised on incomplete information. This undervaluation has materially prejudiced the insolvency resolution process, particularly when the statutory mandate under Section 25(2)(a) of the IBC, 2016, required the RP to take control and custody of all the assets of the Corporate Debtor, including its shareholding in subsidiaries and step-down subsidiaries. The failure to secure and incorporate critical financial information, especially from the Suspended Directors who had withheld cooperation, has led to a valuation exercise that is neither holistic nor representative of the Corporate Debtor’s true worth.

b. The RP’s inability to effectively take control of relevant assets and information despite having obtained an order under Section 19(2) of the Code has undermined the fairness and transparency of the valuation process. It is now well-settled that valuation forms the very basis of commercial decision-making under the Code, and any such exercise, if tainted by material deficiencies or lack of data, must be re-evaluated in the interest of justice and the objectives of the Code.

c. The central objective of the Code, i.e., maximization of the value of assets of the Corporate Debtor, stands defeated in the present matter. The lack of requisite financial details led to low-value bids from PRAs, some of whom either opted out or undervalued the assets of the Corporate Debtor. The resolution plan approved by the CoC offered merely INR 51 crores against claims exceeding INR 2300 crores resulting in an alarming haircut of approximately 97%.

d. It was submitted that, as of 31.03.2020, the Corporate Debtor’s assets were valued at approximately INR 643.91 crores, but the valuation reports failed to reflect this due to lack of information about subsidiaries. The valuers even acknowledged latent value in the subsidiaries but were unable to assign a fair value due to insufficient data. This directly affects the creditors’ recovery and is inconsistent with the object of the CIRP. A comprehensive revaluation, including intangibles such as IPRs and equity investments in subsidiaries, is thus essential to correct this distortion.

e. The RP, though empowered under Sections 18 and 25 of the Code, failed to take necessary and effective measures against the Suspended Directors who deliberately withheld material information in violation of 19(2) Order. Despite repeated discussions in CoC meetings, no contempt proceedings were filed against them by the RP. This omission not only reflects inaction in enforcing compliance but has also directly contributed to an incomplete valuation process.

f. In view of the above, the RP ought to have initiated appropriate action to compel compliance with the 19(2) Order and gather complete data necessary for an accurate and legally compliant valuation of the Corporate Debtor’s assets.

# 4. Submissions by the Respondent:

The respondent/RP filed its reply dated 04.10.2024 stating:

a. This application has been filed with the sole intention of challenging the commercial wisdom of the CoC, which is impermissible under the settled position of law. The Respondent emphasized that the jurisdiction of the Adjudicating Authority is confined to verifying whether the Resolution Plan approved by the CoC meets the requirements of Section 30(2) and Section 30(4) of the Insolvency and Bankruptcy Code, 2016 ("Code"), and not to reassess commercial considerations such as valuation or feasibility of the plan.

b. The Applicant has no locus standi to challenge the valuation reports. The purpose of valuation is solely to assist the CoC in evaluating and approving a Resolution Plan. Once the Resolution Plan has been approved by the CoC, the scope of interference by the Adjudicating Authority is limited to checking compliance with statutory requirements under Sections 30 and 31. The Hon’ble Supreme Court in Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh & Ors. (AIR 2020 SC 3779) has clearly held that the resolution plan need not match the liquidation value and that the valuation exercise is only for the guidance of the CoC. The court further observed that judicial review is not warranted over such commercial decisions once the CoC has exercised its discretion in good faith and in accordance with the Code.

c. The valuation is a question of fact, and courts are traditionally reluctant to interfere with factual findings unless they are shown to be perverse or unsupported by material evidence. In Duncans Industries Ltd. v. State of U.P. (AIR 2000 SC 355), the Hon’ble Supreme Court held that unless prejudice or arbitrariness is established in the process of valuation, the court cannot intervene merely based on conjecture. In the present case, valuation was conducted by Registered Valuers as required under the Code, and no material irregularity has been shown by the Applicant.

d. In Ramkrishna Forgings Ltd. v. Ravindra Loonkar & Anr. (2023 SCC OnLine SC 1490), the Hon’ble Supreme Court reiterated that where two Registered Valuers have submitted fair and liquidation value reports and no objections have been raised before the approval of the Resolution Plan by the CoC, courts should not interfere in the absence of compelling evidence. The Court cautioned that such belated challenges obstruct the Code’s objective of expeditious insolvency resolution. The Applicant’s demand to defer approval of the plan pending revaluation of subsidiaries and step-subsidiaries is contrary to this principle and would only cause unwarranted delays. 

e. The Respondent further pointed out that under Section 18(1)(f) of the Code, the assets of subsidiaries and step-subsidiaries are explicitly excluded from the definition of “assets” of the Corporate Debtor. The Explanation to this section clarifies that assets owned by Indian or foreign subsidiaries of the Corporate Debtor do not form part of the assets of the Corporate Debtor for the purposes of CIRP. This interpretation has been affirmed in Embassy Property Developments Pvt. Ltd. v. State of Karnataka (2019) and in GNIDA v. Roma Unicorn Designex Consortium, where it was held that in the CIRP of a holding company, the assets of subsidiaries cannot be considered, given that both entities have separate legal personalities.

f. Consequently, the prayer for revaluation of subsidiary and step-subsidiary companies is not only barred under Section 18(1)(f) but also unjustified considering the CoC’s independent commercial assessment. Allowing such revaluation would effectively mean re-opening a resolution process that has already culminated in a duly approved plan. This would defeat the object of timely resolution under the Code. In Jaypee Kensington Blvd. Apartments Welfare Association v. NBCC (India) Ltd. (2022) 1 SCC 401, the Hon’ble Supreme Court reiterated that the Adjudicating Authority’s jurisdiction is narrowly confined to ensuring compliance with statutory conditions and not to scrutinize the commercial aspects of the resolution plan approved by the CoC.

g. In para-wise response, the respondent denied the contents of para 1 to 11 of the application as false and baseless except where they are matters of record. With respect to Paras 12 to 14, the Respondent states that IA No. 260/2023 was filed under Section 19(2) seeking cooperation from suspended directors, and was duly allowed on 01.05.2023. Paras 15 to 21 are denied for want of material particulars and documentation. It is reiterated that the subsidiaries' valuation has no bearing on CIRP of the Corporate Debtor. 

h. The respondent/RP further denied the issues raised in para 22 to 30 of the application. It is reiterated that the relief sought regarding revaluation is untenable, especially after CoC’s approval of the Resolution Plan based on existing valuations. The Applicant’s request would essentially mean remanding the matter and reopening concluded proceedings. The contentions in Paras 31 to 36 are also refuted, particularly in light of the statutory bar under Section 18(1)(f) and the ratio of the Hon’ble Supreme Court in Roma Unicorn (supra). Paras 37 to 45 are also denied as misleading, and it is emphasized that the CoC, after proper deliberation, has approved the Resolution Plan. It is categorically denied that the Resolution Professional failed to manage the assets of the Corporate Debtor. 

i. The statements in Paras 46 to 56 of application are denied for the reasons already addressed in the preliminary objections. These are nothing but reiterations of contentions which have already been refuted. Para 57, being the relief clause, warrants no specific response but is denied in its entirety as the reliefs prayed for are contrary to the statutory provisions and judicial dicta.

j. In conclusion, the Respondent submitted that the Application is misconceived, legally untenable, and deserves to be dismissed with costs. It is stated that the entire Application is an attempt to interfere with the CoC’s domain and delay the resolution process and asserted that the Applicant has failed to establish any procedural infirmity or statutory violation, and the Resolution Plan, having been approved by the CoC in exercise of its commercial wisdom, deserves to be approved without further delay.

# 5. Rejoinder filed by the Petitioner/Applicant:

The applicants filed a rejoinder dated 03.12.2024 stating:

a. The Applicant denied all contentions, statements, and allegations in the said reply unless specifically admitted and reiterated all submissions made in its original Application. The Applicant sought to reserve the right to supplement or amend its submissions at an appropriate stage. It is clarified that the Application is not an attempt to challenge the commercial wisdom of the CoC rather to support and enable it by ensuring a fair, complete, and accurate valuation of the Corporate Debtor’s assets in order to achieve maximum recovery for all stakeholders.

b. The valuation exercise conducted was fundamentally flawed and incomplete due to the non-cooperation of the Suspended Directors, who failed to furnish essential financial information despite the binding directions issued under Section 19(2) of the Code. This critical lapse was neither cured nor acted upon by the RP, who failed to initiate contempt proceedings or take effective steps to secure compliance. Consequently, the lack of financial data concerning the subsidiaries and step-down subsidiaries led to undervalued resolution plans being submitted by PRAs, thereby defeating the object of maximization of value.

c. It was further submitted that the RP's own White Paper had acknowledged the potential value inherent in the subsidiaries and step-down subsidiaries, particularly noting the substantial investments around INR 448 crores made by the Corporate Debtor in those entities. The RP had also admitted that lack of essential data from the Suspended Directors had hindered proper valuation. However, in contradiction to this, the RP in his reply now seeks to discredit the need for such valuation. This inconsistency further reinforces the Applicant’s contention that the valuation process was unreliable and must be revisited in the interest of fairness and value realization.

d. The Applicant clarified that it does not claim the assets of the subsidiaries to be treated as part of the Corporate Debtor's direct assets. Instead, the Corporate Debtor’s shareholding in these subsidiaries’ forms part of its asset base and should have been appropriately valued. The RP's suggestion to the contrary is erroneous in law. As per Sections 18 and 25 of the IBC, the RP is under a statutory duty to take custody and control of all assets owned by the Corporate Debtor, including its shareholding in subsidiaries. A comprehensive valuation of these shares was necessary to properly reflect the Corporate Debtor’s financial position.

e. The consequences of the incomplete valuation are stark. The resolution plan approved by the CoC offers a mere INR 51 crores against admitted claims of approximately INR 2,300 crores translating into a haircut of nearly 97% for creditors. This is directly linked to the limited information available to PRAs, which deterred meaningful bidding and prevented fair competition. It is a settled legal position that if a valuation adversely impacts stakeholder interests due to incomplete or flawed methodology, it must be re-examined and, if required, discarded.

f. Several CoC meetings, specifically the 7th, 8th, 12th, 13th and 18th recorded the lack of cooperation by Suspended Directors, which repeatedly hindered the valuation exercise. The RP, despite being aware of such non-compliance, failed to act decisively or pursue enforcement of the 19(2) Order. The Valuer, too, observed that some subsidiaries, especially in Europe, held positive net worth, but accurate financial data was unavailable, and hence valuation remained incomplete.

g. The prayer in the Application, therefore, was squarely aimed at rectifying the outcome of a flawed process. The Applicant is seeking a fresh and detailed valuation particularly of the Corporate Debtor’s investments in subsidiaries and other valuable intangible assets so as to enable informed commercial decisions by the CoC, and to protect the rights of all creditors. This is well within the statutory mandate of the Code and in furtherance of its primary object: maximization of asset value.

h. The Application thus is urged to be allowed and the Resolution Professional directed to undertake a fresh and complete valuation of the Corporate Debtor, factoring in its investments and shareholding in subsidiaries and step-down subsidiaries.

ANALYSIS:

# 6. We have heard the learned counsel for the Applicant and the Respondent/RP and perused the record in detail. The main issue before us is whether a fresh valuation, particularly of the Corporate Debtor’s investments in subsidiaries and step-down subsidiaries, is warranted at this stage of the CIRP.

# 7. Upon thorough consideration it is culled that the Applicant’s grievance is not directed towards the commercial wisdom of the CoC but towards the quality and completeness of information based on which such commercial wisdom was exercised. It is well settled that while judicial review of commercial wisdom is limited, such limitation does not preclude the Adjudicating Authority from intervening where the statutory process leading up to that decision is materially flawed.

# 8. In the present case, the admitted position is that the Suspended Directors failed to provide financial information relating to the subsidiaries and step-down subsidiaries despite a binding order passed under Section 19(2) of the Code. The RP had himself projected that full data necessary for a comprehensive valuation of such subsidiaries was not obtained. In fact, the Valuer appointed by the CoC has acknowledged in his report that critical financial information was unavailable, and had to assign no value to subsidiaries for lack of data. This evidently vitiates the accuracy of the valuation exercise. The CoC itself had repeatedly voiced concern over the lack of financials, and the same is evidenced in the recorded minutes.

In the 12th CoC Meeting dated 13.09.2023,

“The Chairperson informed that for conducting the exercise of valuation of subsidiaries, financials were the basic document and lack of its availability was hindering the process. It was further stated that Hon'ble NCLT, Bengaluru Bench had vide Order dated 01.05.2023 directed the suspended board of directors to extend all assistance and co-operation to RP and requested to provide the same.

Continued non-adherence to the said Order would tantamount to contempt of Court, in which case the Chairperson proposed to take appropriate legal actions in consultation with the CoC members.”

# 9. The issue of non-availability of critical financial data relating to subsidiaries was not limited to isolated instances but recorded consistently across several CoC meetings. In the 9th CoC Meeting held on 31.07.2023, it was recorded that the RP informed the CoC that “only partial information” regarding the foreign subsidiaries had been received, and reiterated that “the data available is insufficient to assess the value of investments made by the Corporate Debtor. The minutes of the 9th CoC Meeting dated 31.07.2023 are extracted below: 

• “Moreover the absence of information w.r.t. the subsidiaries and step-down subsidiaries due to which couldn't assign a value to these subsidiaries and step-down subsidiaries. Had the information been available, he could have enhanced the value of the Corporate Debtor. He further added that the valuation would have been different if the relevant information was available. Mr. Garg also added that in his proposal the entire Resolution Plan value shall be paid upfront to the Creditors and that he had also offered equity stake in the Corporate Debtor in addition to the stake in the new entity as he believed it was possible to turn around the Corporate Debtor and the Financial Creditors could benefit after the Corporate Debtor achieves desired profitability future.

• The representative of HDFC inquired whether the Resolution Applicant will increase the plan value on receipt of information w.r.t. subsidiaries and step-down subsidiaries and whether he had considered the goodwill of the Corporate Debtor. To this Mr. Garg responded that he may consider improving the Resolution Plan value upon receipt of the requisite information of these subsidiaries. He further informed that he had not carried out valuation of goodwill of Corporate Debtor as based on his evaluation the FDA approval for the manufacturing facility had expired and needs to be renewed. However, he is hopeful that the old customers of the Corporate Debtor may contribute to revive the business opportunities with the Corporate Debtor. The CoC members then suggested that all these concerns as highlighted in the meeting shall be sent by way of email to the Resolution Applicant and that the Resolution Applicant can address suitably before the next round of discussions. The Resolution Applicant agreed with the same.”

10. This Tribunal also takes note of the detailed proceedings recorded in the 13th Meeting of the Committee of Creditors held on 06.10.2023, wherein the Resolution Professional apprised the CoC that Mr. Somdas, one of the Suspended Directors, had assured during the 11th CoC meeting held on 23.08.2023 to provide audited and provisional financial statements of the subsidiaries by 28.08.2023. However, he failed to do so, initially citing power disconnection, and later, despite restoration of power on 12.09.2023, no documents were provided. The RP further informed the CoC that multiple written reminders had been sent to Mr. Somdas and the erstwhile statutory auditors, but no cooperation was extended. Even in the 13th meeting, Mr. Somdas again cited personal health reasons and sought further time till 15.10.2023. This pattern of repeated assurances followed by non-compliance clearly reflects deliberate delay and non-cooperation, in breach of the binding order. The minutes of the 14th CoC meeting held on 18.10.2023 are extracted below:

• “The representative DBS of enquired whether there were any liabilities w.r.t. the two European companies as only assets were shown in the report and the approximate realizable value for each company. To this, Mr. Ahuja replied that the liabilities of these companies were less than the assets and as such these companies had positive Net worth. He mentioned that some companies were active and were carrying on business and also presented a latest export/ import report of one of the subsidiaries doing certain trade transactions. Further, based on the additional information from the Promoters, would it be possible to assign values to the same.

• The representative SCB enquired whether Mr. Somdas, suspended Director, had provided any information subsidiaries on repeatedly as assured by him during the previous meetings.To this the Chairperson responded that despite rigorous follow ups no information was forthcoming from him.”

# 11. We have also perused the minutes of the 15th Meeting of the CoC held on 02.11.2023, wherein serious concerns were again raised regarding the lack of accurate and timely financial data in relation to the subsidiaries and step-down subsidiaries of the Corporate Debtor. The Representative of Standard Chartered Bank specifically questioned how value in such subsidiaries could be unlocked. The RP further admitted that the absence of subsidiary-related data had materially hampered the interest of potential Resolution Applicants during the first round of EOI, including the inability of marquee applicants to proceed further. During the said meeting, the RP and his appointed Valuer explicitly sought cooperation from the suspended Director, Mr. Somdas, for submission of relevant financials, who again promised compliance but failed to act promptly. The minutes of the 15th CoC meeting are extracted below:

• “The representative Standard of Chartered Bank (SCB) enquired how the value in the said subsidiaries could be unlocked. To this the Chairperson presented either of the options viz., change in the management/shareholders or appointing a local administrator by or calling for a fresh round of Eol, if agreed by the CoC members and sharing the valuation of subsidiaries with the potential bidders who can factor the same while submitting the Resolution Plan. He also highlighted that lack of availability of this data during first round of EOI has severely hampered the ability to explain the status of subsidiaries and value therein to the Final list of PRA's and which was one reason why some of the marquee PRA's could not move forward to submit a resolution plan

• The representative SCB took note of the same.

• CA Madan Ahuja thereafter explained the rationale for valuation of subsidiaries arrived at by his firm. He stated that the products of subsidiaries were backed by requisite governmental approval for the current financial year, the subsidiaries were active and they had verified local presence etc.

• The Chairperson thereafter urged Mr. Ahuja to seek the clarification from Mr. Somdas, suspended Board of Director who was also present in the meeting. To this, Mr. Ahuja requested Mr. Somdas to provide the financials of subsidiaries to conclude the report based on the authentic data. Mr. Somdas cited power issues which had prevented him earlier from responding to the requests of the Chairperson and his team members and once again assured to provide the same shortly. The Chairperson therefore requested Mr. Somdas to share the information latest by Monday, 06.11.2023.

• CA Madan Ahuja also enquired from Mr. Somdas about approximate value attributable to the subsidiaries considering the present status of the subsidiaries and step-down subsidiaries. To this, Mr. Somdas estimated that in his opinion and on a conservative basis the subsidiaries may fetch up to USD 5 Million.”

This proceeding only reinforces the Tribunal’s finding that despite being aware of such critical valuation gaps and repeated assurances by the suspended directors, the RP failed to take any enforcement or coercive measures under Section 19(2) of the Code. The failure to secure this data proactively undermined the CIRP’s integrity and impeded maximization of value.

# 12. We further note the RP’s own admission in the White Paper that substantial investments, amounting to approximately INR 448 crores, had been made by the Corporate Debtor in its subsidiaries and step-down subsidiaries. However, for CIRP purposes, Section 18(1)(f) of the Code expressly excludes the subsidiaries’ underlying assets from the “assets” defined therein, limiting the RP’s custody during resolution to the Corporate Debtor’s shareholding interests alone. While Section 36(3)(d) indeed includes such shareholding interests within the liquidation estate, this inclusion is triggered only upon the commencement of liquidation, not during the resolution phase. Therefore, any valuation exercise under CIRP must adhere to the statutory estate-stage distinction: the RP may commission a valuation of the Corporate Debtor’s equity shareholding in its subsidiaries and step-down subsidiaries as a financial security and intangible asset, but must not attempt to value or include the subsidiaries’ underlying assets until the liquidation stage.

# 13. While the explanation to Section 18(1)(f) excludes the underlying assets of subsidiaries from the CIRP estate of the Corporate Debtor, the Corporate Debtor’s equity shareholding in such subsidiaries is a distinct financial asset belonging to the Corporate Debtor itself. Such shareholding must therefore be valued as part of the Corporate Debtor’s asset base during CIRP. Section 36(3)(d) of the IBC 2016 considers shares held in subsidiaries as part of the liquidation estate. The Section 36(3)(d) of the Code is reproduced below: 

• 36. (3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include the following: - (d) intangible assets including but not limited to intellectual property, securities (including shares held in a subsidiary of the corporate debtor) and financial instruments, insurance policies, contractual rights; 

# 14. Applying the same, the present valuation reports, which assign no value to equity investments in subsidiaries due to lack of information, cannot be relied upon without a fresh and complete assessment. The valuation of such equity holdings, being integral to the overall asset base of the Corporate Debtor, cannot be rendered nugatory merely on account of non-cooperation by the Suspended Directors. 

# 15. This Tribunal notes with grave concern that despite repeated non-compliance by the Suspended Directors with the binding direction under Section 19(2) of the Code, the Resolution Professional did not initiate any proceedings for contempt nor did he take any steps for coercive enforcement. He also did not deem it necessary to approach this Authority to seek further directions for compliance. This inaction is particularly glaring considering that the representative of the Suspended Directors, Mr. Somdas was present in the 13th CoC meeting, and the RP could have used that opportunity to raise and pursue the issue. The failure to act cannot be justified merely on the plea that information was not forthcoming. 

# 16. The IBC, 2016, imposes positive obligations upon the RP under Sections 18 and 25 to preserve and maximize the value of the assets of the Corporate Debtor, including its investments in subsidiaries. In this regard, the conduct of the RP falls short of the statutory mandate. It is not sufficient for the RP to passively record non-cooperation; proactive and legally sanctioned steps needed to be taken to enforce compliance with the orders of this Tribunal. 

# 17. This failure to act has materially prejudiced the CIRP in the present matter. The inaction of the RP in the face of deliberate and continuing defiance of a binding Section 19(2) Order raises serious concerns about the diligence and responsibility expected from an insolvency professional under the scheme of the Code. 

# 18. This Authority is of the considered view that the conduct of the RP warrants a reference to the IBBI for further scrutiny under its disciplinary framework. It is also pertinent to note that disciplinary proceedings are already pending against the same RP in another matter. This lends further credence to the need for regulatory intervention to examine whether the RP remains fit and proper to discharge duties and responsibilities under the Code. In view of this, it is directed that a Copy of this Order be forwarded to the IBBI for necessary action.

# 19. This Tribunal is also of the considered view that maximization of value is the cardinal objective of the Code, and any process tainted by incomplete or inaccurate valuation runs contrary to this object. The CoC must be afforded an opportunity to exercise its commercial wisdom based on complete and reliable financial information. It is only upon such foundation that a viable and just resolution plan can be formulated and approved.

DECISION:

# 20. Considering the above factual position, the minutes of the meeting recorded of the Various meetings of the COC, this Authority comes to the Conclusion that the non-consideration of Value of the Investments made in Subsidiaries and Stepdown subsidiaries has led to Incorrect Valuation of the Corporate Debtor and has materially prejudiced the CIRP process. Hence, in the interests of justice and in furtherance of the objectives of the IBC, 2016, the I.A. No. 433 of 2024 is required to be allowed and We order accordingly.

# 21. Before parting with the Order, We direct that

• (1) The RP to cause a fresh and independent valuation of the Corporate Debtor’s equity shareholding in its subsidiaries and step-down subsidiaries, taking into account all available financial, legal, and market data, and in compliance with the provisions of Regulation 35 of the CIRP Regulations and Section 36(3)(d) of the Code;

• (ii) The Suspended Directors to fully cooperate with the RP and the appointed valuers by providing all relevant documents, data, and clarifications as may be required, failing which, the RP is at liberty to file appropriate proceedings for contempt or coercive directions for enforcement of the earlier 19(2) Order.

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