[Byju's Insolvency] No Adjudicatory Power Under IBC To Reconstitute CoC Or “Provisional Constitution” Of CoC: NCLAT, Chennai

The National Company Law Appellate Tribunal (NCLAT) Chennai bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Jatindranath Swain (Technical Member) has held that a Resolution Professional has no adjudicatory power under the Insolvency and Bankruptcy Code, 2016 (“IBC”). Once the Committee of Creditors (“CoC”) is constituted, the Resolution Professional cannot reconstitute the CoC on his own accord. The scope of updating claims is limited only to determination of quantum and does not extend to reviewing the status of a creditor. There is no concept of 'provisional constitution' of the CoC under the Code, and once constituted, it is final unless modified by the Adjudicating Authority. Brief Facts: Byju Raveendran, suspended director and promoter of M/s Think and Learn Pvt. Ltd. (Parent Company of Byju's) filed the appeal under Section 61 of the IBC. He assailed the order dated 29.01.2025 passed by the NCLT, Bengaluru Bench, whereby the Tribunal held that the Interim Resolution Professional (“IRP”) had no authority to reconstitute the CoC. The NCLT accordingly set aside the reconstitution dated 31.08.2024. It upheld the CoC constituted on 21.08.2024 and restored Aditya Birla Finance Ltd. as a Financial Creditor. The dispute arose because Aditya Birla Finance Ltd. submitted a claim of ₹47.12 crore as a Financial Creditor, which the IRP admitted earlier, but later, the IRP reclassified it as an Operational Creditor and reconstituted the CoC. Similarly, Glass Trust Company LLC, another creditor, was removed from the CoC on the ground that its claim was contingent. Both creditors had challenged these actions before the NCLT. Issues (i) whether the IRP has the power to reconstitute the CoC, without the leave of the Adjudicating Authority? and (ii) whether the IRP has exceeded his authority conferred under law? Observations: The NCLAT noted that IRP constituted the CoC on 21.08.2024 and reported it on 22.08.2024. The controversy arose when IRP reconstituted the CoC on 31.08.2024 by excluding two major financial creditors who held 0.41% and 99.41% voting share respectively. The IRP retained only Incred Financial Services Ltd. with 100% voting share.The Tribunal relied on Mr. K.N. Rajkumar v. V. Nagarajan wherein it was held that:“.... the 'Resolution Professional' has no 'Adjudicatory Power' under the I & B Code, 2016 and further that when once the 'Committee of Creditors' is/was formed, the 'Resolution Professional' cannot change the 'Committee of Creditors'.”The Tribunal referred to Union Bank of India v. Rajdeep Clothing & Advisory Pvt. Ltd., CA (AT) (Ins) No. 399 of 2021, where it was held that there is no provision in the Code or Regulations which permit review of status of a creditor as the provision focuses only on the amount of claim. Thus, IRP/RP, on its own cannot review and reverse his own earlier decision without approval of Adjudicating Authority.The Tribunal reiterated that the scope of updating exercise is confined to determination of quantum of claims and cannot extend to review of the status of the creditor.The Tribunal also quoted with approval its earlier ruling in Rajnish Jain v. BVN Traders & Ors., CA (AT) (Ins) No. 519 of 2020, which clarified, “if the Resolution Professional has accepted a claim as a Financial Debt and Creditor as a Financial Creditor, then he cannot review or change that position in the name of updation of Claim.”The Tribunal emphasised that there is no concept of “provisional constitution” of the CoC under the Code. It observed, “as per the IBC there is no provision to 'provisionally' constitute the CoC, the CoC once constituted is final and cannot be revised by the IRP/RP without the interference of the Adjudication Authority.” The Tribunal had strongly deprecated the conduct of the IRP and ordered disciplinary proceedings by the IBBI.The Appellate Tribunal found no merit in the contention that the entire constitution of CoC dated 21.08.2024 should be declared illegal and set aside due to the misconduct of the IRP. It held that the first CoC was duly constituted on the basis of collated claims; the subsequent reconstitution was mischievous.The Tribunal thus dismissed the appeal and affirmed that the CoC constituted on 21.08.2024 shall remain in effect. Case Title: Byju Raveendran, Suspended Director and Promoter of M/s. Think and Learn Pvt. Ltd. vs. Aditya Birla Finance Ltd. & 3 Ors. Case No.: Company Appeal (AT) (CH) (Ins) No.120/2025 (IA Nos.329 , 330, 381,406 & 405 /2025) For Appellant : Mr. Guru Krishnakumar, Senior Advocate Mr. Abhijit Sinha, Advocate Mr. V. Shyamohan, Advocate Ms. Sradhaxna Mudrika, Advocate Ms. Isha Ghai, Advocate Ms. Anshika Bajpai, Advocate Ms. Vrinda Baheti, Advocate Ms. Riya Sara Renchen, Advocate Mr. Vishesh Goel, Advocate For Respondents : Mr. Aparajith Vishwantath & Ms. Sneha Parthasarathy, Advocates for R1 Mr. Abhinav Vasisht, ...

[Byju's Insolvency] No Adjudicatory Power Under IBC To Reconstitute CoC Or “Provisional Constitution” Of CoC: NCLAT, Chennai

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[Byju's Insolvency] No Adjudicatory Power Under IBC To Reconstitute CoC Or “Provisional Constitution” Of CoC: NCLAT, Chennai

Tazeen Ahmed

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