NCLAT principal bench, New Delhi in its order passed on January 27, 2022 in the matter of Dheeraj Wadhawan vs. The Administrator, Dewan Housing Finance Corporation Limited, observed that there exists a difference between ‘supersession of Directors’ under Section 45-IE of the Reserve Bank of India, Act (“RBI Act”) and the directors of the suspended board of the corporate debtor, as provided under the Insolvency and Bankruptcy Code, 2016 (“IBC”).  The NCLAT observed that Section 24(3)(b) of the IBC provides that the Resolution Professional should give notice/ details of the meeting of the CoC to the ‘suspended’ Directors of the Corporate Debtor. This notice is to be given to the ‘suspended’ Board of Directors, and ‘suspended’ under Section 24(3)(b) of IBC has the same meaning as ‘suspended’ under Section 17(1)(b) of IBC.  This is very different from ‘supersession of Directors’ under Section 45-IE of RBI Act.  The NCLAT observed that upon supersession, the superseded directors ‘vacate’ their office.  This action has finality attached to it.  Hence, superseded directors are not entitled to the notice of CoC meeting and has no right to participate in the meeting.

The Appellant is a promotor, majority shareholder, erstwhile director and guarantor of DHFL/ Corporate Debtor. In November 2019, the RBI exercised its powers under Section 45-IE of the RBI Act and superseded the Board of Directors because the business of DHFL was being carried out in a manner detrimental to the interests of the creditors and depositors. Thus, the Board of Directors of DHFL vacated their offices and the power stood transferred to the Administrator, who then initiated Corporate Insolvency Resolution Process of the Corporate Debtor. Thereafter, a moratorium was imposed.

This Administrator did not give due notice of the meetings of  CoC along with documents and agenda for meetings to the Appellant/ erstwhile Director of DHFL/Corporate Debtor.  The Adjudicating Authority refused the request of the Appellant to be allowed to attend meetings of the CoC as member of the erstwhile Board of Directors of the Corporate Debtor since the erstwhile directors were superseded by the Administrator under the RBI Act. Thus they could not be permitted to participate in the CIRP. Against this, the Appellant preferred an appeal in the NCLAT.

The NCLAT did not interfere with the order of NCLT and observed that since the Board of Directors of DHFL had already vacated their offices, the powers of Board of Directors stood vested in the Administrator as per Section 45-IE of the RBI Act. There was no question of ‘suspension’ of the Board of Directors under Section 17(i)(b) of the IBC.

The NCLAT observed that in the present case, the directors have been superseded by the Administrator under the RBI Act and their vacation is final. If they are to be appointed at a later stage, it would be a fresh/ new appointment and not a continuation of the previous appointment as Directors of the Company.