CoC can not alter approved resolution plan, reallocate funds of dissenting creditors: NCLAT

The Committee of Creditors (CoC) cannot modify or alter a resolution plan for reallocation of funds of dissenting creditors, after it is approved, insolvency appellate tribunal NCLAT has said. Dismissing an appeal by Bank of Baroda in the Reliance Communications Infrastructure Ltd (RCIL) matter, a two-member NCLAT bench said the assenting members of the committee cannot alter the financial layout once the bids have been approved.

“It is true that the CoC with commercial wisdom can take a decision regarding different aspects of the plan, including manner of distribution, but once the commercial wisdom has been exercised by approving the resolution plan in meeting, the modification of the said distribution mechanism, which is impermissible, cannot be saved in the name of commercial wisdom of the CoC,” said NCLAT.

The National Company Law Appellate Tribunal (NCLAT) order came following an appeal by the Bank of Baroda in the insolvency proceedings related to Reliance Communications Infrastructure Ltd (RCIL). The NCLT had approved the bid of Reliance Projects & Property Management Services Ltd (RPPMSL), a Jio subsidiary. This resolution plan was approved by 67.97 per cent vote share of the CoC on August 5, 2021.

Bank of Baroda was one of the members of the CoC who approved RPPMS’s plan. However, IDBI Bank, State Bank of India, and some other financial institutions dissented. The plan was sent for approval before the Mumbai bench of the National Company Law Tribunal (NCLT). Meanwhile, Bank of Baroda, in its capacity as assenting financial creditor, filed an application before the NCLT, praying to direct the CoC to convene a meeting on the proposal to reallocate distribution of proceeds under the resolution plan concerning the loan to Reliance Bhutan.

Later, NCLT on October 17, 2023, directed the resolution professional of RCIL to convene a meeting of the CoC to consider the manner of reallocation of payments to be made to creditors. RP convened a meeting of the CoC on October 27, 2023, where the resolution for reallocation and reassignment of Reliance Bhutan was passed with 67.55 per cent majority. However, IDBI Bank and State Bank of India objected. Disposing of BoB’s plea, NCLT on December 19, approved the resolution plan as proposed by RPPMS.

IDBI then moved to NCLT, challenging the reallocation of proceeds by the CoC on October 27, 2023. On this, NCLT held that the CoC in its decision cannot alter the financial layout with respect to the entitlement of financial creditors. The Reliance Bhutan loan was to be assigned to the approving financial creditor. This resolution plan could not be modified by assigning the Reliance Bhutan Loan to the dissenting financial creditors, NCLT said on October 10, 2025.

The order was challenged by Bank of Baroda and it was dismissed. “The Adjudicating Authority in the impugned order after considering all relevant clauses has rightly come to the conclusion that the decision of the CoC dated 27.10.2023 is contrary to the approved resolution plan and cannot bind the dissenting financial creditors,” NCLAT said.

It was held that the dissenting financial creditors are entitled to receiving payment in the manner provided in the resolution plan and the CoC cannot alter the financial layout in respect of their entitlement under the plan. “We are in full agreement with the view taken by the adjudicating authority as noted above. The adjudicating authority did not commit any error in allowing the plea filed by the IDBI Bank. We do not find any good ground to interfere with the decision of the adjudicating authority, NCLAT said, dismissing the appeal.