Constitution Of CoC In Violation Of Section 21(2) Proviso Of IBC Is Nullity In Eyes Of Law, Vitiates Entire CIRP: NCLT

The NCLT Bengaluru Bench ruled that the constitution of the Committee of Creditors (CoC) in violation of Section 21(2) of the Insolvency and Bankruptcy Code (IBC) is null and void, vitiating the entire Corporate Insolvency Resolution Process (CIRP). The case involved an application by Vipin Kumar Sharma, challenging the CoC’s constitution due to the inclusion of related parties. The applicant argued that the CoC’s formation was fraudulent and collusive, involving related parties of the Corporate Debtor. The NCLT found that the CoC’s constitution violated the proviso of Section 21(2) of the IBC, which prohibits related parties from being part of the CoC. The tribunal emphasized that any decisions made by such a CoC are invalid. This ruling underscores the importance of adhering to statutory provisions in the constitution of the CoC and highlights the tribunal’s role in ensuring compliance with the IBC to maintain the integrity of the CIRP.