Pending Challenge to CoC Constitution Not a Bar on RP Appointment u/s 27: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) Principal Bench at New Delhi, has held that a pending challenge to the constitution of the Committee of Creditors cannot invalidate the appointment of a Resolution Professional approved under Section 27 of the Insolvency andBankruptcy Code, 2016.

The appeal filed by the suspended director of the corporate debtor was directed against an order passed by the NCLT, New Delhi. The order allowed an application filed by the Committee of Creditors under Section 27 for the appointment of a new Resolution Professional. The suspended director contended that his challenge to the constitution of the CoC was pending in a separate appeal when the CoC proceeded with approval.

A Bench comprising Justice Ashok Bhushan, Chairperson, and Barun Mitra (Technical Member) examined the submissions and observed that Section 27 empowers the Committee of Creditors to replace the Resolution Professional with required majority. The tribunal noted that the CoC had validly exercised its statutory power.

The appellate tribunal held that the mere pendency of a challenge regarding the constitution of the CoC cannot serve as a bar against the CoC exercising its powers under Section 27.

While dismissing the appeal, the NCLAT made it clear that the appointment of the Resolution Professional pursuant to the impugned order would have no bearing on the pending appeal challenging the constitution of the Committee of Creditors.

The appeal was accordingly dismissed. The tribunal found no error in NCLT’s approval for changing the Resolution Professional.

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