Part of Resolution Plan Cannot Be Given on Application of Operational Creditor Till Approval of Plan: NCLAT

The NCLAT ruled that a part of the resolution plan cannot be provided to an operational creditor before the plan’s approval by the Committee of Creditors (CoC). The tribunal stated that premature disbursement to specific creditors disrupts the equitable distribution framework under the Insolvency and Bankruptcy Code (IBC). The decision ensures adherence to the insolvency process and safeguards the interests of all stakeholders. NCLAT emphasized that any distribution of funds must occur post-approval to maintain transparency and fairness. Legal experts interpret this ruling as a step toward reinforcing the integrity of the insolvency resolution process. It also prevents potential misuse of funds during proceedings. Stakeholders are advised to strictly follow the stipulated guidelines under the IBC to avoid legal challenges and ensure the resolution plan’s impartial execution.