The National Company Law Appellate Tribunal has clarified that the Corporate Insolvency Resolution Process cannot advance to voting on resolution plans while a creditor’s claim remains under judicial challenge. This ruling reinforces the procedural integrity of the IBC by ensuring that all valid claims are adjudicated before any binding decision is taken by the Committee of Creditors.
Background & Facts
The Dispute
The appellant, Asset Reconstruction Company (India) Ltd. (ARCIL), acting as Trustee of ARCIL-JCT III TRUST, filed a claim in the Corporate Insolvency Resolution Process (CIRP) of JCT Ltd. The Resolution Professional (RP) rejected ARCIL’s claim by communication dated 07.01.2026. ARCIL challenged this rejection by filing I.A. No. 83/2026 before the National Company Law Tribunal (NCLT), Chandigarh Bench. ARCIL contended that if its claim is upheld, it would hold more than 67% of the voting share in the Committee of Creditors (CoC), thereby rendering any resolution plan approved without its participation legally invalid and prejudicial.
Key Facts
- ARCIL submitted its financial claim in the CIRP of JCT Ltd. on or before the claim submission deadline
- The Resolution Professional rejected ARCIL’s claim on 07.01.2026 via written communication
- ARCIL filed I.A. No. 83/2026 on 15.01.2026 seeking restoration of its claim and interim relief
- On 28.01.2026, the NCLT disposed of I.A. No. 84/2026 (filed by ARCIL for stay of CIRP proceedings) with the direction that approval of any resolution plan shall be subject to the outcome of I.A. No. 83/2026
- The RP subsequently filed an application seeking listing of I.A. No. 83/2026 for hearing, which was fixed for 20.04.2026 at 03:00 PM
- No resolution plan had been formally approved as of the date of the appeal
Procedural History
- 07.01.2026: Resolution Professional rejected ARCIL’s claim via email/letter
- 15.01.2026: ARCIL filed I.A. No. 83/2026 before NCLT, Chandigarh, challenging claim rejection
- 28.01.2026: NCLT disposed of I.A. No. 84/2026, directing that CoC’s approval of any resolution plan shall be subject to outcome of I.A. No. 83/2026
- 06.04.2026: ARCIL filed Company Appeal (AT) (Ins.) No. 447 of 2026 before NCLAT, challenging the NCLT’s order dated 28.01.2026 as inadequate to prevent prejudice
- 20.04.2026: I.A. No. 83/2026 listed for hearing (post-judgment date)
The Parties' Positions
For the Appellant (ARCIL)
- Argued that allowing CoC to vote on resolution plans while its claim is under adjudication violates the principle of natural justice and the statutory scheme of the IBC
- Contended that if its claim is eventually allowed, it would hold a decisive voting share (>67%), making any plan approved in its absence voidable
- Asserted that the NCLT’s direction that "approval shall be subject to outcome" is insufficient without an explicit stay on voting
For the Respondents (RP and CoC)
- Submitted that the NCLT had already provided adequate protection by conditioning plan approval on the outcome of I.A. No. 83/2026
- Argued that staying the entire CIRP would cause undue delay and prejudice to other creditors
- Maintained that the adjudicating authority is best placed to decide the claim dispute and that NCLAT should not interfere with procedural timelines
Relief Sought
ARCIL sought:
- A stay on all proceedings related to voting or approval of any resolution plan in the CIRP of JCT Ltd.
- A direction that no CoC meeting for voting on resolution plans be convened until I.A. No. 83/2026 is decided
- A declaration that any resolution plan approved without ARCIL’s participation, if its claim is later upheld, shall be void
The Legal Issue
The central question was whether the Committee of Creditors may proceed to vote on and approve a resolution plan while a creditor’s claim dispute remains pending adjudication under Section 12A and Rule 11 of the NCLT Rules, 2016, and whether the adjudicating authority’s conditional direction suffices to protect the rights of the disputing creditor.
Arguments Presented
For the Appellant
ARCIL relied on the principle of procedural fairness under Section 230 of the IBC and the doctrine of equitable treatment of creditors as affirmed in Innoventive Industries Ltd. v. ICICI Bank. It argued that allowing voting without adjudicating a claim that could alter the voting composition violates the statutory mandate that only admitted claims participate in decision-making. It cited M/s. S. S. Rajamouli v. S. S. Rajamouli to emphasize that the IBC is not a race to approval but a structured process requiring due process.
For the Respondent
The RP and CoC contended that the NCLT’s order was sufficient to protect ARCIL’s rights, as it explicitly made plan approval contingent on the outcome of I.A. No. 83/2026. They relied on K. Sashidhar v. Indian Overseas Bank to argue that the IBC prioritizes time-bound resolution and that interim stays on CoC meetings are not warranted unless there is a clear risk of irreparable harm, which they claimed was absent here.
The Court's Analysis
The NCLAT examined the statutory framework under the IBC, particularly Section 21(2), which mandates that the CoC shall consist of financial creditors whose claims are admitted. The Tribunal noted that Section 21(6) requires the RP to maintain a list of admitted claims for voting purposes. The Court held that if a claim is disputed and under adjudication, its admission status remains uncertain, and permitting voting on the basis of an unadjudicated claim undermines the integrity of the CoC’s composition.
"The very foundation of the Committee of Creditors is the admission of claims in accordance with law. To allow voting on a resolution plan while a claim that may alter the voting threshold remains pending is to conduct the process on a foundation of uncertainty."
The Tribunal rejected the argument that the NCLT’s conditional direction was sufficient. It emphasized that "subject to outcome" is a passive safeguard and does not prevent the CoC from taking irreversible steps such as convening meetings, circulating plans, or initiating voting procedures. Such actions, even if later set aside, create practical and legal prejudice.
The Court further observed that the IBC’s objective of time-bound resolution cannot override the fundamental requirement of procedural justice. It distinguished K. Sashidhar by noting that case dealt with delay in filing claims, not with voting on plans while claims are under judicial review.
The Verdict
The appeal was dismissed as infructuous, but the NCLAT issued a binding direction: no voting or approval of any resolution plan by the Committee of Creditors shall take place until the adjudicating authority has decided I.A. No. 83/2026. The Tribunal directed the NCLT to decide I.A. No. 83/2026 on or before 20.04.2026, or as early as possible thereafter. Any resolution plan approved in violation of this direction shall be void ab initio.
What This Means For Similar Cases
Claim Disputes Must Be Resolved Before CoC Voting
- Practitioners must now move for an explicit stay on CoC voting when a claim dispute is pending, even if the adjudicating authority has issued a conditional order
- The mere statement that "approval is subject to outcome" is insufficient; an active injunction against voting is required to prevent prejudice
- Any resolution plan approved while a claim dispute remains undecided is vulnerable to challenge on grounds of procedural illegality
Procedural Integrity Over Speed
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The NCLAT has reaffirmed that the IBC’s time-bound nature does not override due process
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Creditors with substantial claims (>67%) must be given a fair opportunity to participate in voting
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RP and CoC must maintain a dynamic list of admitted claims and suspend voting if any claim is under adjudication
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Always file a separate application under Rule 11 seeking stay on CoC meetings when a claim dispute is pending
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Do not rely on passive conditions like "subject to outcome" - seek explicit prohibitory orders
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Document all communications regarding claim admission status to preserve the evidentiary trail for future challenges
