NCLAT Says Suspended Directors Must Give Confidentiality Undertaking to Access Resolution Plan

The National Company Law Appellate Tribunal has held that suspended directors can be required to furnish a confidentiality undertaking before receiving access to a resolution plan and other confidential material in a corporate insolvency resolution process.

Issue before the Appellate Tribunal

The dispute concerned whether a resolution professional could insist on a confidentiality undertaking from members of the erstwhile board before sharing the resolution plan.

Suspended directors have recognised participation rights in the corporate insolvency resolution process, but resolution plans and connected documents frequently contain commercially sensitive material.

How the split was resolved

Technical Member Naresh Salecha was called upon to resolve an earlier difference of opinion within the NCLAT. He agreed with the view that a confidentiality undertaking is compatible with the rights of suspended directors.

The requirement does not exclude them from the process. It regulates the manner in which sensitive information may be accessed.

Practical effect

Resolution professionals may therefore insist on a confidentiality undertaking before sharing the plan and related material. Suspended directors retain their statutory participation role, but that right operates alongside obligations designed to prevent misuse or disclosure of confidential information.