NCLAT Sets Aside NCLT Order Replacing RP, Says It Cannot Act As 'Moral Guardian'

The National Company Law Appellate Tribunal (NCLAT) at Delhi has set aside an order of the National Company Law Tribunal (NCLT) which had replaced the Resolution Professional (RP) chosen by the Committee of Creditors (CoC) with its own nominee, observing that the adjudicating authority cannot act as a “moral guardian.”

The order came on appeals filed by 17 homebuyer-allottees of Three C Projects Pvt. Ltd., a real estate company undergoing insolvency proceedings.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra held that the adjudicating authority had overstepped its jurisdiction and could not substitute the CoC's decision.

“The Adjudicating Authority is required to apply its mind within the four corners of law and cannot over-reach its assigned role by assuming the role of being a moral guardian. Since the Adjudicating Authority has chosen to exercise a jurisdiction not vested on it by law, the impugned order passed by the Adjudicating Authority is held by us to be coram non judice.”

The dispute arose in the corporate insolvency resolution process (CIRP) of Three C Projects Pvt Ltd. In its 52nd meeting held on February 11, 2026, the CoC, consisting largely of homebuyer-allottees, resolved with 100% voting share to replace the existing RP, Ajit Kumar, with Krit Narayan Mishra.

However, four dissenting allottees challenged the decision before the NCLT. By its order dated March 2, 2026, the NCLT rejected the CoC's nominee and instead appointed Rajesh Ramnani as RP.

Seventeen homebuyer-allottees then approached the NCLAT, arguing that the CoC had complied with all statutory requirements, including securing unanimous approval and obtaining the proposed RP's written consent. They contended that the NCLT had no jurisdiction to override the CoC's commercial wisdom.

They also alleged that the RP appointed by the NCLT was a related party of the outgoing RP, as both were common directors in a restructuring company.

Opposing the appeal, the respondents argued that the proposed RP had shown “extraordinary interest” in securing the appointment. They relied on his prior assurances to the CoC, legal advice rendered before appointment, and his engagement of legal counsel.

The NCLAT noted that these were the three grounds relied upon by the NCLT and found no merit in them.

“We do not find any illegality in the CoC seeking such an assurance from the proposed RP since the CoC was dissatisfied with the tardy progress of resolution process under the current RP and wanted to be assured of effective, efficient and timely completion of the resolution.”

On the legal opinion given by the proposed RP, the tribunal found that it had been rendered in an independent professional capacity and was expressly stated to be unrelated to his appointment.

On the issue of legal representation, the tribunal held that since the proposed RP had been impleaded as a party, engaging counsel was a legitimate exercise of his rights.

The tribunal emphasised the limited role of the adjudicating authority under Section 27 of the Insolvency and Bankruptcy Code.

“This interference on the part of the Adjudicating Authority in not accepting the CoC's choice of the RP and substituting with a RP nominated by them is wholly unwarranted and legally impermissible in terms of Section 27 of the IBC.”

It also cautioned against reliance on allegations raised by a small group of dissenting allottees.

“Having said that, we would also like to add that the Adjudicating Authority should have exercised greater caution in according seriousness to the conjectural and unsubstantiated allegations raised by a miniscule minority of 4 allottees out of 2149 home-buyers allottees that the choice of the proposed RP suggested by the CoC suffered from bias.”

Holding the NCLT's order to be unsustainable in law, the NCLAT set it aside and remanded the matter, directing that the CoC's decision to appoint Krit Narayan Mishra be forwarded to the Insolvency and Bankruptcy Board of India (IBBI) for confirmation in accordance with law.