NCLT Indore Bars Suspended Directors from Joining Resolution Plan Approval, Cites CoC’s Commercial Primacy

NCLT Indore Bars Suspended Directors from Joining Resolution Plan Approval, Cites CoC’s Commercial Primacy

Introduction

The National Company Law Tribunal (NCLT) has ruled that suspended management has no right to intervene at the stage of approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC). A Bench comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta held that permitting such participation would undermine the commercial wisdom of the Committee of Creditors (CoC) and delay the insolvency process.

Factual Background

GEI Power Ltd. was admitted into insolvency proceedings on January 22, 2025. Jagdish Kumar Parulkar was appointed as Interim Resolution Professional and subsequently confirmed as Resolution Professional by the CoC. The CoC approved a resolution plan, which is currently pending before the NCLT for final approval. The application was filed by Carnet Elias Fernandes, a member of the suspended management, seeking permission to participate in the approval proceedings.

Procedural Background

The applicant sought impleadment before the NCLT, arguing that the resolution plan would impact his rights and that he should be granted an opportunity to be heard. The Resolution Professional opposed the application, contending that the tribunal’s role at the approval stage is limited to examining compliance with statutory requirements and does not extend to reconsidering commercial decisions.

Issues

1. Whether suspended management can participate in proceedings for approval of a resolution plan.

2. Scope of the NCLT’s jurisdiction at the plan approval stage under the IBC.

Applicability of principles of natural justice at this stage.

Contentions of the Parties

The applicant contended that denial of participation would violate principles of natural justice and relied on Vijay Kumar Jain v. Standard Chartered Bank (2019) to argue that former directors are entitled to participate in insolvency proceedings.

The Resolution Professional argued that upon commencement of CIRP, management powers vest in the Resolution Professional and that allowing such intervention would amount to reopening commercial decisions already taken by the CoC.

Reasoning and Analysis

The Tribunal held that at the stage of approval of a resolution plan, its role is confined to ensuring compliance with the provisions of the IBC and does not extend to adjudicating commercial aspects of the plan. It observed that allowing the suspended management to participate would effectively invite objections to a plan already approved by the CoC, thereby interfering with its commercial wisdom.

The Bench clarified that the Supreme Court’s decision in Vijay Kumar Jain pertains to participation in CoC meetings and post-approval remedies, and does not confer a right on suspended directors to intervene at the approval stage. It further noted that the applicant had been declared ineligible under Section 29A of the IBC in earlier proceedings, and permitting participation would indirectly circumvent that disqualification. The Tribunal also emphasized that such intervention could delay the insolvency process and defeat the objective of timely resolution.

Decision

The NCLT dismissed the application, holding that suspended management cannot be impleaded or heard at the stage of approval of the resolution plan.

In this case the appellant was represented by Advocates Shantanu Chourasia and Adhir Lot. Meanwhile the respondent was represented by Advocates Ritesh Kumar Sharma and Aishani Tawar.