Are CoC Decisions Still Supreme in the CIR Process? — Practitioner’s Study of Recent NCLT Interventions
The Committee of Creditors (CoC) has long been treated as the commercial brain of the insolvency process — its “commercial wisdom” routinely insulated from judicial second-guessing. But the past 18–24 months show a more nuanced reality: while NCLT continues to reiterate the primacy of the CoC, it is also stepping in more frequently — not to substitute commercial judgment, but to police legality, fairness, and the boundaries of process. The result: CoC supremacy remains the norm, not the rule. Practitioners must therefore recalibrate their expectations and playbook.
What NCLT has actually been doing
Three consistent themes emerge from recent NCLT orders:
1. Reaffirmation — with limits. NCLT repeatedly upholds that judicial interference with CoC commercial wisdom is permissible only on narrow grounds: non-compliance with Section 30(2), procedural unfairness, fraud, or manifest illegality. Where a plan meets the statutory yardstick, the CoC’s view is sacrosanct.
2. Scrutiny of process (not price). NCLT is more willing to drill into whether pivotal statutory steps were followed — correct claim adjudication, treatment of related parties, votes correctly counted, and disclosure obligations met. If process is tainted, the tribunal will set aside or remit a plan even if the price looks attractive on paper.
3. Guarding against misuse / collusion. In cases of alleged collusion, fraudulent petitions, or manufactured votes, NCLT has acted decisively — sometimes imposing costs or penalties — underscoring that CoC votes bought through improper means will not be honoured.
4. Why this matters — practical consequences for practitioners
- Due diligence on procedure is now as important as valuation. Resolution professionals and bidders must document claim verification, voting processes, and communications. A robust paper trail often decides appeal outcomes.
- Related-party and eligibility issues are red-flagged. CoC approvals involving connected persons, late entrants, or opaque restructuring mechanisms invite detailed appellate scrutiny. Expect NCLT to question such plans more closely.
- Remedies are surgical, not substitutional. NCLT tends to remit or direct re-consideration rather than rewrite commercial terms — but remittal kills momentum and raises execution risk. Practitioners must prepare for time and cost consequences.
Two recent patterns to note
- The “no-grounds” defence strengthened where Section 30(2) is satisfied. Where procedural compliance and statutory criteria are met, NCLT/NCLAT has shown reluctance to upset CoC approvals — a comfort to bona fide bidders and CoCs.
- Aggressive policing where the IBC is misused. Cases exposing fraudulent filings, manufactured creditor classes, or collusion attract not only plan rejection but also penalties, signaling zero tolerance for gaming the process.
What should CoCs, RPs and bidders do — a short checklist
- Document everything. Minutes, claim registers, email trails, voting records, and valuation assumptions must be airtight.
- Apply enhanced related-party checks. Flag any late entrants, shadow investors or unexplained consortium changes early.
- Stress-test the plan on legality, not just economics. Ask: does it survive a Section 30(2) and Section 61(3) challenge?
- Engage independent legal/compliance sign-offs before final voting — faster to prevent an appeal than to defend one.
- Plan for contingency execution. If remitted, ensure bidders’ offers stay valid or include escrow/earnest mechanisms.
Final word — supremacy with responsibility
NCLT’s posture is not anti-CoC. Rather, it balances deference with accountability. CoC decisions remain central — but they are no longer a guaranteed shield. The message to practitioners is clear: preserve and demonstrate procedural sanctity as zealously as you pursue commercial value. Those who do both will find their plans survive appellate scrutiny; those who don’t may see months of hard work unravelled on legal technicalities.
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I am Insolvency Resolution Professional handled/ handling many insolvency cases. In case of any queries related to IBC, you may contact me at Krit Narayan Mishra, kritmassociates@gmail.com | Mob: 9910859116
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