Laws, Courts & Judgments.

NCLAT Upholds CoC's Power to Replace RP Despite Pending Challenge to its Constitution

New Delhi - The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed by a suspended director, affirming that a pending challenge to the constitution of a Committee of Creditors (CoC) does not impede its statutory power to replace the Resolution Professional (RP) under Section 27 of the Insolvency and Bankruptcy Code (IBC).

The order clarifies that the CoC, as it currently exists and functions, is fully empowered to make crucial decisions for the corporate insolvency resolution process, including changing the RP.

Case Background

The appeal was lodged by Bikram Bhadur, the Suspended Director of Beoworld Pvt. Ltd., against an order dated July 29, 2025, by the National Company Law Tribunal (NCLT), New Delhi Bench. The NCLT had approved an application filed by the CoC to appoint Shri Rakesh Kumar Parakh as the new Resolution Professional, replacing the previous one.

Mr. Bhadur challenged this decision, arguing that the CoC's resolution was invalid because he had already filed a separate appeal (Company Appeal (AT) (Ins) 1874 of 2024) challenging the very formation of the CoC, which is still pending before the NCLAT.

Appellant's Arguments

The counsel for the appellant, Bikram Bhadur, contended that since the legitimacy of the CoC itself was under question in a pending appeal, the committee should not be permitted to exercise significant powers like appointing a new RP. The core of the argument was that any decision made by a body whose constitution is disputed should be stayed until the primary challenge is resolved.

Tribunal's Legal Reasoning and Decision

The NCLAT, after considering the submissions, firmly rejected the appellant's arguments. The Tribunal focused on the clear mandate provided by the Insolvency and Bankruptcy Code .

Upholding Section 27 of IBC

The bench emphasized the statutory power vested in the CoC under Section 27 of the IBC. This section unequivocally grants the CoC the authority to replace an RP with a 66% majority vote.

The judgment stated:

> "Under Section 27 , it is the CoC which is empowered to replace the Resolution Professional with requisite majority. The CoC which is existing as on date and functioning has passed the resolution for change of the RP which has been approved the impugned order."

Pending Litigation Not a Ground for Stay

The Tribunal explicitly ruled that a pending challenge cannot be used to paralyze the functions of the CoC. It observed that the mere fact that an appellant is aggrieved by the CoC's constitution and has filed an appeal is not a valid reason to oppose the appointment of a new RP approved under the due process of Section 27 .

The NCLAT noted: > "The mere fact that appellant is aggrieved by the constitution of the CoC and made a challenge which is pending consideration in this Tribunal cannot be a ground to oppose the appointment of the RP who has the approval under Section 27 ."

Final Verdict and Implications

Finding no error in the NCLT's order, the NCLAT dismissed the appeal. The decision reinforces the principle that the insolvency resolution process must proceed without being unduly hindered by collateral challenges. The operational authority of the CoC remains intact while legal disputes over its formation are adjudicated separately.

To safeguard the appellant's rights in the other pending matter, the Tribunal added a crucial clarification: > "We make it clear that appointment of Resolution Professional by the impugned order shall have no bearing on the pending issues raised by the appellant."

This judgment serves as a significant precedent, ensuring that the day-to-day management and critical decisions within a Corporate Insolvency Resolution Process (CIRP) are not stalled, thereby upholding the time-bound objectives of the IBC.