Committee of creditors not a juristic person but can litigate in IBC disputes: NCLAT

The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) has held that a Committee of Creditors (CoC) is not a juristic person in the classical sense, but can nevertheless litigate in its own name for disputes under the Insolvency and Bankruptcy Code (IBC). [CoC, Think & Learn v. Riju Raveendran].A coram of Judicial Member Justice (retd) Seshasayee and Technical Member Jatindranath Swain delivered the ruling while dismissing an appeal filed by the CoC of Think and Learn (Byju's) challenging an NCLT order refusing to implead it in proceedings seeking removal of GLAS Trust Company LLC from the CoC..The NCLAT held,"On broader jurisprudential principles, a CoC cannot be termed as an entity with right to litigate....since CoC is a statutory body and a decision- making entity, to deny it it’s legal existence for all purposes merely because it is neither a juristic person might be akin to throwing the baby out with the bathwater.".Byju's was admitted into the corporate insolvency resolution process (CIRP) under Section 9 of the IBC in July 2024. On August 21, 2024, the resolution professional (RP) constituted a four-member CoC. However, on August 31, 2024, the RP reconstituted the CoC by dropping two financial creditors — GLAS Trust, which held a 99.41% voting share, and Aditya Birla Capital, which held a fractional voting share.Both creditors challenged their removal before the NCLT. Their applications were allowed on January 29, 2025, restoring them to the CoC. Subsequently, on February 17, 2025, the NCLT formally allowed the application recording the original CoC constitution and dismissed the RP’s application for acceptance of the reconstituted CoC as infructuous.The dispute resurfaced when a suspended director of Think and Learn, Riju Raveendran, filed an application seeking removal of GLAS Trust from the CoC. During these proceedings, the CoC filed an application seeking to implead itself as a party.The NCLT dismissed the CoC’s impleadment plea on two grounds: that the CoC lacks a legal character and can be represented only by the RP; and that the dispute concerned only GLAS Trust’s membership.The CoC challenged this order before the NCLAT..The Appellate Tribunal said that the case raised a fundamental question that had remained largely unexamined since the IBC came into force.“Does the CoC possess a legal character as a juristic person? Can it sue or be sued in its name?”It described the CoC as a statutory creation formed by the ReP. It said that the body is a collective of financial creditors who retain independent contractual rights against the corporate debtor.“They are bound together not by a common cord but only by a common denominator.”The Tribunal emphasised that the IBC requires creditors to act together in the resolution process but does not merge their identities.“The IBC may require the financial creditors to go for a huddle, yet it does not aim to build any team spirit within the CoC. The members thereof may, but they need not.”The Bench rejected comparisons with companies, partnerships, societies, clubs and trusts. It noted that CoC members assemble not to share profits but to minimise losses..Despite the above conclusion, the NCLAT recognised the practical reality of insolvency litigation.“If in the working of the IBC, a generally evolved and accepted practice which lets the CoC to litigate in its name is allowed to be in vogue for a decade now and is found to be working effectively, why should it be rejected?”The Tribunal said that disturbing this practice could create chaos in insolvency proceedings.“We find no reason to bar the CoC, a creation of the very IBC, to litigate in its name.”It also disagreed with the NCLT’s view that only the RP can represent the CoC.“The Code constitutes CoC and RP as entirely different entities, and have assigned them different roles and specific responsibilities.”.However, the Tribunal upheld the NCLT’s refusal to implead the CoC in the application seeking removal of GLAS Trust. It said that the dispute concerned only the creditor whose membership was challenged.“Anything that affects or threatens the individual right of a member of the CoC cannot be construed as a threat to all...CoC is neither a necessary party, not even a proper party for deciding the issue whether one of its members, the Glas Trust, should be in the CoC.”The appeal was dismissed and the NCLT order was confirmed..The CoC was represented by Senior Advocate Jayant Mehta with Advocates Prachi Johri, Mrigangi Parul, Girishkumar Fating, Mayan Jain and Ajay Shankar Rao..Riju Raveendran was represented by Senior Advocate Haripriya Padmanabhan with Advocates V Shyamohan, Sradhaxna Mudrika, Anshika Bajpai, Shreya Nair, Vishal Sinha and Anirud C..The RP was represented by Advocates Pooja Mahajan, Arveena Sharma, Ichchha Kalash and Samridhi Shrimali from Chandhiok & Mahajan..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.