Tribunal Affirms Non-Justiciability of CoC Decisions, Rejects Allegations of Valuation Manipulation and Procedural Lapses
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has delivered a significant judgment on July 14, 2026, reinforcing the sanctity of the commercial wisdom exercised by the Committee of Creditors (CoC) in insolvency proceedings. The tribunal dismissed two appeals filed by Santosh R. Shetty, the suspended director and promoter of Sristi Hospitality Pvt. Ltd., challenging the approval of a resolution plan by the CoC and the National Company Law Tribunal (NCLT), Mumbai.
The appeals were rooted in allegations of gross undervaluation of the corporate debtor's property, procedural irregularities, and manipulation of creditor claims during the Corporate Insolvency Resolution Process (CIRP). Shetty claimed that the resolution plan, which was approved with a 100% voting share by the CoC, failed to maximize asset value as mandated under Section 30(2)(a) of the Insolvency and Bankruptcy Code (IBC), 2016.
However, the NCLAT, comprising Justice Mohammad Faiz Alam Khan and Naresh Salecha, upheld the CoC's decision, emphasizing that the commercial decisions of the CoC, once made, are non-justiciable and not subject to judicial review, except for statutory compliance. The tribunal noted that the CoC had followed due process, and the valuation of assets was conducted by IBBI-registered valuers in accordance with the CIRP Regulations.
The tribunal further rejected the appellant's contention that he was denied an opportunity to submit a superior resolution plan, stating that no formal Expression of Interest (EOI) or resolution plan was submitted by Shetty or any associated investor. The judgment reiterated that mere investor commitment letters do not qualify as resolution plans under the IBC, which requires adherence to prescribed formats and timelines.
In addressing the procedural concerns, the NCLAT acknowledged minor lapses, such as the non-circulation of minutes from a CoC meeting, but deemed them procedural rather than material irregularities. The tribunal also noted that Shetty had ample opportunity to participate in the CoC meetings and raise objections at appropriate stages, which he failed to do.
This judgment reinforces the principle that the commercial wisdom of the CoC is paramount in the insolvency process and that courts and tribunals should not interfere with CoC's business decisions unless there is a clear breach of statutory provisions. It serves as a reminder of the importance of timely participation and compliance with procedural requirements by all stakeholders in the insolvency process.
Bottom line:-
Insolvency and Bankruptcy Code (IBC) - Commercial wisdom of the Committee of Creditors (CoC) is paramount and non-justiciable. Judicial review of CoC decisions under Sections 31 and 61 of IBC is confined to statutory compliance and cannot extend to reassessing commercial adequacy or feasibility of the resolution plan.
Statutory provision(s): Sections 21, 24, 25(2)(h), 30(2), 31, 61(1) of the Insolvency and Bankruptcy Code, 2016
