Tribunal Rules Promoters Lack Locus to Contest CoC Decisions; Finds Homebuyers Adequately Represented Despite Delay in Authorised Representative Appointment
In a significant verdict dated August 13, 2026, the National Company Law Tribunal (NCLT), Chandigarh Bench, dismissed a petition filed by Vinod Bagai and others-promoters, shareholders, and suspended directors of M/s Samar Estates Private Limited-challenging the Corporate Insolvency Resolution Process (CIRP) and the subsequent approval of the Resolution Plan.
The dispute arose after the CIRP was initiated against Samar Estates following a petition by Punjab and Sind Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Resolution Professional (RP), Rahul Jindal, oversaw the process, culminating in the approval of a Resolution Plan by the Committee of Creditors (CoC) with a unanimous 100% voting share.
The petitioners contended that the CIRP was vitiated on multiple grounds: inadequate representation of homebuyers due to delay in appointment of an Authorised Representative (AR), undervaluation of the corporate debtor's assets, inflated claims admitted in favor of the financial creditor, and procedural irregularities in the conduct of the CIRP. They sought annulment of the CIRP, setting aside of valuation reports, and rejection of the Resolution Plan.
However, the Tribunal meticulously analyzed these contentions and arrived at the following key conclusions:
1. Locus Standi of Suspended Directors:
Once CIRP is admitted, the powers of the Board of Directors get suspended under Section 17 of the IBC, vesting management control with the RP. The Tribunal reaffirmed that suspended directors, while entitled to provide operational and historical information under Section 24, lack voting rights or veto powers and thus have no locus to challenge the commercial wisdom of the CoC unless material irregularity or statutory non-compliance is established. The Tribunal cited the Supreme Court's ruling in Piramal Capital and Housing Finance Ltd. v. 63 Moons Technologies Ltd. (2025), emphasizing the limited role of erstwhile directors.
2. Representation of Homebuyers and Validity of CoC Decisions:
The petitioners alleged that the absence of a formally appointed AR at the initial stages deprived homebuyers of adequate representation. The Tribunal found that although the formal appointment of the AR was delayed, the Insolvency and Bankruptcy Board of India's amendment to Regulation 16A(2) of the CIRP Regulations (effective September 24, 2024) allowed the selected insolvency professional to act as an interim AR with full rights and duties during pendency of appointment. Mr. Prashant Gupta, acting as the interim AR, conducted multiple consultation meetings with homebuyers, enabling them to participate meaningfully and cast votes collectively. Consequently, the Tribunal held that procedural delays did not vitiate the CIRP or subsequent CoC decisions.
3. Valuation and Admission of Claims:
The petitioners challenged the valuation of the corporate debtor's assets, alleging undervaluation compared to previous valuations cited by Punjab and Sind Bank. The Tribunal clarified that valuation under CIRP Regulations must be done by Registered Valuers as per Regulation 35, considering prevailing market conditions and third-party rights. The exclusion of certain land parcels (Pocket-B) from valuation was justified due to prior transfer of development rights. Further, the admitted claim of Punjab and Sind Bank was upheld, as the petitioners failed to produce documentary evidence to substantiate their lower computation. The Tribunal emphasized that the unanimity of the CoC vote, including homebuyers' participation, negated any hypothetical impact of claim adjustments on approval.
4. Commercial Wisdom of CoC and Conduct of Resolution Process:
The Tribunal underscored that the feasibility, viability, and commercial terms of the Resolution Plan fall exclusively within the CoC's domain. Judicial interference is limited to statutory non-compliance or material irregularities, none of which were established. Allegations about non-sharing of certain documents or changes in the evaluation matrix were found insufficient to invalidate the process.
The Tribunal's decision aligns with the Supreme Court's precedent that courts should not interfere with the commercial wisdom exercised by the CoC, except on limited grounds. It also clarifies the role and rights of suspended directors and the legal framework for representation of classes of creditors such as homebuyers under the IBC and CIRP Regulations.
The order concludes by dismissing the application filed by the petitioners and affirming the validity of the CIRP and the approved Resolution Plan, subject to any orders from the National Company Law Appellate Tribunal (NCLAT) in related appeals.
This judgment provides crucial guidance on the procedural and substantive safeguards in insolvency proceedings, reinforcing the primacy of the CoC's commercial decision-making while ensuring statutory rights of all creditor classes are respected.
Bottom Line:
Insolvency and Bankruptcy Code - Promoters and suspended directors cannot challenge the commercial wisdom of the Committee of Creditors (CoC) unless material irregularities or statutory non-compliance are evident. Procedural delays in appointing an Authorised Representative (AR) for homebuyers do not vitiate the Corporate Insolvency Resolution Process (CIRP) if statutory compliance is otherwise maintained.
Statutory provision(s):
Sections 7, 13, 15, 17, 21(6A)(b), 24, 25A(3A), 27, 30(2), 31, 60(5) of the Insolvency and Bankruptcy Code, 2016; Regulations 4A, 6, 16A, 27, 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016; Rule 11 of the NCLT Rules, 2016.
Vinod Bagai v. Rahul Jindal, (NCLT)(Chandigarh Bench) : Law Finder Doc Id # 2970411
