Resolution Professional Cannot Reconstitute Committee Of Creditors Once Formed

Posted On - 8 September, 2025 • By - King Stubb & Kasiva

BEFORE THE HON’BLE NCLAT, CHENNAI

SUMMARY:

[1]The NCLAT, Chennai held that once a Committee of Creditors (CoC) is validly constituted, the Interim Resolution Professional (IRP)/Resolution Professional (RP) has no authority to reconstitute it by reclassifying creditors. Any such action without the approval of the Adjudicating Authority (NCLT) is illegal. The Tribunal upheld the CoC constituted on 21.08.2024 and deprecated the conduct of the IRP who had attempted to exclude major creditors in a subsequent “reconstitution.”

FACTS:

  • CIRP of Think and Learn Pvt. Ltd. (Byju’s) was initiated on 16.07.2024 by NCLT Bengaluru.
  • The IRP admitted claims and initially constituted a CoC on 21.08.2024 with four financial creditors: Glass Trust Co. LLC (99.41%), Aditya Birla Finance Ltd. (0.41%), Incred Financial Services (0.18%), and ICICI Bank.
  • Without NCLT’s leave, the IRP reclassified Aditya Birla Finance as an operational creditor and excluded Glass Trust Co., reconstituting the CoC on 31.08.2024 to include only Incred Financial Services with 100% voting share (earlier 0.18%).
  • Aggrieved creditors challenged this action before NCLT, which set aside the reconstitution and restored the original CoC. The suspended director, Byju Raveendran, appealed.

ISSUES:

  1. Whether an IRP/RP can reconstitute the CoC after its valid constitution.
  2. Whether the IRP exceeded his powers by reclassifying financial creditors as operational creditors.

JUDGEMENT:

  • No power to reconstitute CoC: The NCLAT reiterated that an RP’s role is administrative and not adjudicatory. Once the CoC is formed, the RP cannot change its composition or reclassify creditors (K.N. Rajkumar v. V. Nagarajan, affirmed by SC).
  • Scope of claim updation limited: Regulation 14 only allows updating the quantum of claims, not altering a creditor’s status from financial to operational. Reliance was placed on Union Bank of India v. Rajdeep Clothing and Rajnish Jain v. BVN Traders.
  • Misconduct of IRP: The IRP’s conduct in misleading the Tribunal and excluding creditors with 99.41% voting share was strongly deprecated, and disciplinary proceedings by IBBI were directed.
  • Appeal dismissed: NCLAT upheld the NCLT’s order restoring the CoC as on 21.08.2024 and dismissed Byju Raveendran’s appeal.

ANALYSIS:

This judgment reinforces a critical principle of the IBC: the RP cannot usurp adjudicatory functions of the NCLT. The decision preserves creditor democracy by ensuring that once the CoC is validly constituted, its composition cannot be manipulated by the IRP/RP. It also highlights the limited scope of “claim updation” and places a strong check on attempts to re-engineer creditor status to alter voting outcomes. The ruling will have far-reaching implications for safeguarding the integrity of CIRP proceedings.

[1] Byju Raveendran v. Aditya Birla Finance Ltd. & Ors.

Company Appeal (AT) (CH) (Ins) No.120/2025 (IA Nos. 329, 330, 381, 406 & 405/2025)

Judgment Dated: August 12, 2025