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Insolvency: Reserves Verdict on Committee of Creditors' Impleadment Plea
The on Monday reserved its verdict on a critical procedural question arising from the ongoing insolvency proceedings of edtech giant (): whether the is a in an application seeking the removal of one of its own members. A Division Bench of Justices J.B. Pardiwala and K. Vinod Chandran heard arguments from both sides and reserved judgment after indicating that the CoC ought to be heard in any matter where its interests are directly affected.
The Dispute
The case stems from an application filed by Riju Ravindran, a former director of , seeking the removal of from the CoC. GLAS Trust had been appointed as a member of the CoC during the initiated against . Ravindran’s application before the , Bengaluru, not only sought the exclusion of GLAS Trust but also prayed for a that all decisions taken by the CoC since 2025—over a two-year period—should be declared .
The CoC immediately moved for impleadment in that application, arguing that it was directly affected by the relief sought. However, the NCLT rejected the CoC's request, holding that the CoC was neither a necessary nor a . The CoC then appealed to the .
NCLAT Ruling
On , the NCLAT delivered a nuanced ruling. It acknowledged that the CoC is not a like a company or statutory corporation, but held that it could litigate in its own name for the purposes of the . Despite this recognition, the NCLAT agreed with the NCLT’s reasoning that the CoC was not a necessary or in Ravindran’s application. This paradoxical position—accepting the CoC’s capacity to sue but denying its standing in the specific case—prompted the CoC to challenge the order before the .
Proceedings
Appearing for the CoC, Senior Advocate forcefully argued that the CoC was the entity most directly affected by Ravindran’s application. “The short point in the present appeal is, the party who is directly affected by relief sought in an application, is a to the application,” Sibal submitted. He elaborated that Ravindran sought to remove one of the four members of the CoC and, consequentially, to invalidate all decisions taken by the CoC for the past two years. “He filed an application... that one out of four members of the COC should be excluded from the COC... because he sought, consequentially, a relief that all the decisions of the COC, if you exclude that member, and all decisions of the COC since 2025 for the last two years, should be declared ,” Sibal told the Bench.
He pointed out that after receiving notice of the application, the CoC had moved an impleadment application because both the interim and final reliefs would directly affect the functioning and decisions of the CoC. The NCLT had initially rejected the request, and the NCLAT, despite holding that the CoC could maintain such an application, still declined to treat it as a necessary or . Sibal emphasized that Ravindran’s application had already been heard and judgment reserved, yet the CoC had not been given a hearing despite the potentially far-reaching consequences.
For Riju Ravindran, Senior Advocate told the Bench that he had instructions not to contest the CoC’s request for a hearing, particularly in light of passed by the . “We have received instructions not to contest the appeal, because Your Lordships' are hurting us,” Thawani stated. He submitted that the proceedings were affecting the company’s assets and requested only that the CoC be allowed to participate in the pending application. “Our only request is, let them be included in my application. Let them be heard, but please request the NCLT to dispose it in a .” He also noted that arguments had already been completed and judgment reserved, and reopening the entire matter could cause further delay.
The Bench considered the position that the CoC ought to be heard in any application where its interests could be affected. The Court indicated that the matter could be taken back before the NCLT for a hearing of the CoC without requiring all other parties to repeat arguments already concluded. Ultimately, the Bench reserved its verdict in the appeal.
Legal Implications
This case raises a fundamental question about the of the Committee of Creditors under the IBC. Traditionally, the CoC is treated as a rather than a litigant. However, as the NCLAT recognised, the IBC empowers the CoC to act in its own name for certain purposes. The 's eventual ruling will clarify whether the CoC can demand to be heard as a party in proceedings that seek to remove a member or invalidate its decisions.
From a practical standpoint, if the CoC is denied impleadment, the risk is that a single application by a disgruntled stakeholder could unravel years of creditor-driven resolutions without the body that made those decisions having any opportunity to defend them. Conversely, allowing the CoC to intervene in every member-related dispute could slow down the resolution process, which the IBC aims to expedite. The Court's indication that the CoC could be heard without requiring a full rehearing suggests a balanced approach: ensuring without unduly delaying the resolution.
Impact on Legal Practice and Insolvency Proceedings
For insolvency practitioners, this case underscores the importance of . The CoC is the fulcrum of the CIRP, and its decisions often involve substantial financial stakes. The ability of the CoC to participate in litigation affecting its composition and decisions is crucial for maintaining the integrity of the process. If the rules in favour of the CoC, it will set a precedent that the CoC has a right to be heard in any application that seeks to alter its membership or nullify its resolutions. This could lead to more careful drafting of applications by parties challenging CoC membership, knowing that the CoC itself will have a voice.
Moreover, the case highlights the evolving interpretation of "" in the context of the IBC. While the Code borrows many principles from the , the unique nature of the CoC as a collective body may require a distinct approach. The 's ruling will provide clarity not only for the case but for numerous other insolvency proceedings where similar issues arise.
Conclusion
The has reserved its verdict on a pivotal procedural issue in the insolvency saga. The crux of the matter is whether the Committee of Creditors must be given the opportunity to defend itself when its decisions or composition are challenged. With both sides—except the CoC—having completed their arguments, the Court is now poised to decide this issue. The outcome will have far-reaching implications for the conduct of insolvency proceedings in India, potentially shaping how the CoC's rights are balanced against the need for speed and finality in the resolution process. Legal professionals across the corporate and insolvency bar will be watching closely as the judgment is delivered.
