Reconstituted CoC Cannot Reassess or Overturn Earlier Commercial Approval of Resolution Plan under IBC
- REEDLAW
- 10 hours ago
- 4 min read
REEDLAW Legal News Network reports: In a pivotal ruling, the National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, clarified that a reconstituted Committee of Creditors (CoC) has no authority to reassess or overturn the commercial decision of an earlier CoC that had already approved a compliant resolution plan. The Appellate Tribunal held that upon remand, the CoC’s reconsideration must be confined strictly to the directions of the Adjudicating Authority and cannot extend to a fresh evaluation of the plan, reaffirming the sanctity of commercial wisdom under the Insolvency and Bankruptcy Code, 2016.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Rakesh Kumar Jain and Justice Mohammad Faiz Alam Khan (Judicial Members) and Mr. Naresh Salecha (Technical Member) while adjudicating a Company Appeal, held that upon remand, the Committee of Creditors was required to reconsider the resolution plan only to the limited extent directed by the Adjudicating Authority and not to reassess it afresh, reaffirming that a reconstituted CoC cannot overturn the commercial decision of the original CoC that had duly approved a compliant resolution plan under the Insolvency and Bankruptcy Code, 2016.
The Appellate Tribunal dealt with an appeal filed by the Successful Resolution Applicant under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the order of the Adjudicating Authority dated 13 June 2025, which had dismissed an application under Section 60(5) of the Code. The dispute arose out of the rejection of the Appellant’s revised resolution plan by the newly constituted Committee of Creditors (CoC) after the matter had been remanded by the Adjudicating Authority for reconsideration on limited grounds. The Appellant contended that the CoC and the Resolution Professional had exceeded their mandate by reopening the entire plan instead of restricting their review to the specific issues identified by the Adjudicating Authority in its earlier order dated 8 July 2024.
The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor had originally commenced on 19 September 2019 under Section 7 of the Code, and the Appellant’s resolution plan was approved by the original CoC on 2 December 2020 with a voting share of 76.69%. Subsequently, certain members of the CoC assigned their debts to new entities, resulting in a reconstitution of the CoC. When the Adjudicating Authority remitted the plan for reconsideration, the newly constituted CoC, comprising the assignees, rejected the revised plan submitted by the Appellant despite its compliance with the directions contained in the remand order. The Appellant contended that once the plan had been approved by the original CoC, the assignees who stepped into the shoes of the original creditors could not reverse or reconsider their earlier assent, as such action would undermine the finality and sanctity of the CoC’s earlier commercial decision.
The Appellant further argued that the Adjudicating Authority’s order directing reconsideration could not be interpreted as permitting a de novo review of the entire plan, relying on the Supreme Court’s decision in Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Another, REEDLAW 2021 SC 09523 to assert that only limited aspects could be remitted for compliance under Section 30(2). It was also contended that the revised plan duly addressed all five deficiencies identified in the earlier order and that the CoC’s rejection was arbitrary and contrary to the objectives of the Code, which favour resolution over liquidation. The Appellant emphasised that the Corporate Debtor was a viable enterprise of considerable scale and economic importance, and its liquidation would lead to significant loss of value and employment.
On the other hand, the Resolution Professional and the Financial Creditor argued that the remand permitted a fresh consideration of the entire plan, not a limited review. They submitted that the CoC was entitled to reassess the feasibility and viability of the plan, and that the commercial wisdom of the CoC remained paramount and non-justiciable under the law, relying on the precedents in K. Sashidhar v. Indian Overseas Bank and Others, REEDLAW 2019 SC 02502 and Jaypee Kensington Boulevard Apartments Welfare Association and Others v. NBCC (India) Limited and Others, REEDLAW 2021 SC 03527. It was further contended that the revised plan continued to suffer from non-compliance regarding the disclosure of the source of funds and equitable treatment of creditors of the same class, and the comfort letters submitted by the Appellant lacked a binding financial commitment.
In rebuttal, the Appellant submitted that the financial capability had been adequately demonstrated through updated certificates and comfort letters from credible financial entities, and that the objections raised by the CoC were factually and legally unsustainable. The Appellant maintained that the CoC’s decision to reject the plan and opt for liquidation was against the spirit of the Code. The Tribunal, after hearing all parties, examined the legality of the remand scope, the conduct of the newly constituted CoC, and the binding effect of the earlier CoC’s approval within the framework of Section 30 and Section 31 of the Code.
Mr. Krishnan Venugopal, Sr. Advocate with Ms. Prachi Darji, Ms. Manvi Jain, Mr. Apoorv Agarwal, Mr. Avinash Mathews, Mr. Tushar Gadia and Ms. Astha Singh, Advocates, represented the Appellant.
Mr. Palash S Singhai and Mr. Harshal Sareen, Advocates, appeared for the Resolution Professional.
Mr. Gaurav Mitra, Mr. Siddharth Garg, Mr. Himanshu Choubey, Mr. Srijan Sinha, Mr. Srajan Yadav, Ms. Lihzu, Ms. Trisha and Ms. Arushi, Advocates, appeared for the Respondent No. 2.
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