In a significant ruling that reinforces the sanctity of approved insolvency plans, the National Company Law Appellate Tribunal (NCLAT) has held that a Committee of Creditors (CoC) cannot modify a cleared resolution plan to reallocate funds intended for dissenting financial creditors. The decision underscores the limits on the exercise of commercial wisdom after a plan receives formal approval.
The Core of the Dispute
The appeal was filed by Bank of Baroda in the insolvency proceedings of Reliance Communications Infrastructure Ltd (RCIL). A two-member NCLAT bench dismissed the bank's plea, firmly stating that once a resolution plan is approved, the assenting members of the CoC cannot alter its established financial distribution framework.
The tribunal elaborated that while the CoC possesses the commercial wisdom to decide on various aspects of a plan, including the manner of distribution, this discretion cannot be invoked post-approval to modify the distribution mechanism. "The modification of the said distribution mechanism, which is impermissible, cannot be saved in the name of commercial wisdom of the CoC," the NCLAT order stated.
Background and NCLT Proceedings
The case originated from the insolvency resolution of RCIL, where the National Company Law Tribunal (NCLT) had approved a resolution plan submitted by Reliance Projects & Property Management Services Ltd (RPPMSL), a subsidiary of Jio. This plan was approved by 67.97% of the CoC by vote share on August 5, 2021.
While Bank of Baroda voted in favour, lenders including IDBI Bank and State Bank of India (SBI) dissented. After NCLT approval, Bank of Baroda later sought directions to convene a CoC meeting to consider reallocating proceeds, specifically concerning a loan to Reliance Bhutan. Acting on this, the NCLT directed the resolution professional to convene a meeting on October 17, 2023.
In the subsequent meeting held on October 27, 2023, a resolution proposing the reallocation and reassignment of the Reliance Bhutan loan was passed with a 67.55% majority, despite objections from IDBI Bank and SBI.
NCLAT Upholds the Principle of Finality
However, the NCLT, in its order dated October 10, 2025, later ruled that the approved plan could not be modified in this manner. It held that the CoC could not alter the financial layout relating to creditors' entitlements post-approval and that the Reliance Bhutan loan, earmarked for assenting creditors, could not be reassigned to dissenting lenders through a subsequent decision.
Upholding the NCLT's view, the appellate tribunal in its recent order agreed that the CoC's decision dated October 27, 2023, was contrary to the approved resolution plan and could not bind the dissenting financial creditors. The NCLAT bench stated, "We are in full agreement with the view taken by the adjudicating authority... The adjudicating authority did not commit any error in allowing the plea filed by the IDBI Bank." Consequently, Bank of Baroda's appeal was dismissed.
This ruling sets a crucial precedent in India's insolvency landscape, emphasizing that the commercial wisdom of creditors is not an open-ended power and must be exercised within the bounds of the approved resolution plan, ensuring certainty and finality in the corporate insolvency resolution process.
