Tribunal says adjudicating authority cannot question reasons for replacement or substitute CoC’s choice, expunges adverse remarks against Indian Bank officials
The National Company Law Appellate Tribunal (NCLAT) has reaffirmed that the Committee of Creditors (CoC) has the statutory right under Section 27 of the Insolvency and Bankruptcy Code, 2016 (IBC) to replace a Resolution Professional (RP) at any stage of the Corporate Insolvency Resolution Process (CIRP), without having to justify its decision in detail.
A bench comprising Officiating Chairperson Justice Yogesh Khanna and Technical Members Barun Mitra and Ajai Das Mehrotra disposed of three connected appeals filed by Indian Bank against orders of the National Company Law Tribunal (NCLT), Special Bench, New Delhi. The appeals challenged directions and observations made while dealing with the bank’s application seeking replacement of the RP in the insolvency proceedings of Nimitaya Hotel & Resorts Ltd.
The dispute arose after the CoC had approved a resolution plan in January 2023, but the plan approval application remained pending for more than two years. During this period, Indian Bank moved applications seeking dismissal of the approved plan, permission to issue a fresh Form-G, and replacement of the RP. The bank later said the CoC had lost confidence in the RP and had voted for a new professional with the requisite majority.
However, the NCLT had questioned the timing of the replacement request and sought explanations from the bank’s officers, including a Deputy General Manager (DGM), regarding the reasons for the move. The tribunal also made remarks suggesting possible lack of bona fides and directed that the matter be examined at the bank’s higher level.
On appeal, NCLAT held that such scrutiny was unwarranted. Referring to Section 27 of the IBC and earlier rulings, the appellate tribunal said the law does not require the CoC or the bank to give detailed reasons for replacing an RP. The tribunal noted that the relationship between the CoC and the RP is based on trust and confidence, and if that confidence is lost, the CoC is entitled to act.
The tribunal relied on earlier decisions including Bank of India v. Nithin Nutritions Pvt. Ltd., Sumat Kumar Gupta v. Committee of Creditors of Vallabh Textiles, and Subrata Roy v. Rajiv Mohan, to hold that the adjudicating authority’s role is limited to verifying whether the CoC has passed the resolution with at least 66% voting share and whether the proposed RP has given written consent. The adjudicating authority cannot substitute its own nominee or impose its own view on the CoC’s commercial wisdom.
Finding that the NCLT had overstepped its jurisdiction, NCLAT observed that the delay of 2.5 years in moving the replacement request could not be treated as a legal bar, since Section 27 expressly permits replacement “at any time” during CIRP. The tribunal also said there was no discussion in the impugned orders showing how the foundational principles of the IBC had been disturbed.
As a result, NCLAT expunged the adverse remarks made against Indian Bank officials in the orders dated 07.07.2026, 16.07.2026 and 14.08.2026. It also directed that the application concerning replacement of the RP, or any subsequent application on the same issue, be considered first by the NCLT. Only thereafter should the pending applications relating to dismissal of the earlier resolution plan and issuance of a fresh Form-G be taken up, followed by the original plan approval application if necessary.
The appeals were disposed of with all contentions of the parties left open before the NCLT.
Bottom Line :
Section 27 of the Insolvency and Bankruptcy Code, 2016 empowers the Committee of Creditors (CoC) to replace the Resolution Professional (RP) at any stage during the Corporate Insolvency Resolution Process (CIRP) without requiring detailed reasons, provided the prescribed procedure is followed. The adjudicating authority cannot substitute the CoC's choice of RP with its own nominee.
Statutory provision(s): Section 27, Insolvency and Bankruptcy Code, 2016
