NCLAT affirms CoC's limited legal status to litigate under IBC while dismissing appeal for lack of necessity in specific proceedings.
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) in Chennai has clarified the legal character of the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code (IBC), 2016, affirming its ability to litigate within the framework of the IBC for issues arising under the Code. The judgment, delivered on February 24, 2026, was in response to an appeal by the CoC of Think and Learn Pvt. Ltd., challenging a prior order that dismissed its application to be impleaded in proceedings concerning the removal of a financial creditor.
The case revolved around whether the CoC has a juristic personality to litigate independently, a question that has largely been unexamined in the decade since the IBC's inception. The tribunal, comprising Justice N Seshasayee and Member (Technical) Jatindranath Swain, concluded that while the CoC does not possess a corporate personality akin to registered entities, it can litigate for functional efficacy within the IBC framework.
The tribunal explained that the CoC, though not a juristic person, is a statutory entity formed to facilitate insolvency resolution. It is not akin to a company, partnership, or society, as it does not have perpetual succession or a common seal. Instead, it is a collective of financial creditors with individual interests bound by statutory necessity rather than mutual agreement.
The ruling emphasized the CoC's role as a decision-making body within the IBC, acknowledging its practice of litigating in its name despite jurisprudential challenges. The tribunal noted that this practice has been effective for a decade and aligns with the functional needs of the IBC. It recognized that allowing CoC to litigate in its name does not contravene any statutory mandate, provided it pertains to issues within the IBC.
However, the tribunal upheld the Adjudicating Authority's decision that the CoC need not be impleaded in proceedings specifically targeting the removal of a single financial creditor. Such matters, it ruled, concern the independent contractual rights of the creditor with the corporate debtor, and do not necessitate CoC's involvement.
The judgment also clarified that the Resolution Professional (RP) and CoC are distinct entities and that the RP does not solely represent the CoC in legal proceedings. The ruling has implications for the procedural conduct of insolvency proceedings, particularly in clarifying the CoC's role and rights within the IBC's legal framework.
Bottom Line:
Under the IBC, a Committee of Creditors (CoC) does not possess a corporate personality or juristic identity to litigate in its name. However, it can litigate in its name for issues within the framework of IBC, as a statutory body for functional efficacy.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 - Sections 3(23)(g), 21, 30, 31, 241, 242
