Suspended Director Can Flag CIRP Violations But Not Question CoC's Commercial Wisdom: NCLT Chandigarh

The Chandigarh Bench of the National Company Law Tribunal (NCLT) on 1 July held that a suspended director has the locus to bring alleged violations of the Insolvency and Bankruptcy Code, 2016 (IBC) and the Corporate Insolvency Resolution Process (CIRP) Regulations before the NCLT, but cannot question the commercial wisdom of the Committee of Creditors (CoC).

A Bench comprising Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal dismissed an application filed by Robin Dahiya, suspended director of Hygiene Feeds & Farms Pvt. Ltd., seeking rejection of the Resolution Plan approved by the CoC, after finding no statutory violations or procedural irregularities. It observed:

“Consequently, a suspended director cannot be precluded from bringing to the notice of the Adjudicating Authority any alleged violation of the provisions of the Code, the Regulations framed thereunder or any material irregularity in the conduct of the CIRP.

At the same time, the rights of a suspended director remain circumscribed by the scheme of the Code. Such participation does not confer any right to question the commercial wisdom exercised by the Committee of Creditors or to seek a re-evaluation of the commercial terms of a Resolution Plan.”

The CIRP against Hygiene Feeds & Farms commenced on 18 July 2022 after the NCLT admitted a petition under Section 9 of the IBC (application by an operational creditor to initiate CIRP) filed by Aviagen India Poultry Breeding Company Pvt. Ltd. for default of Rs. 2.60 crore. Punjab National Bank, the sole financial creditor, constituted the CoC with 100% voting share. After multiple rounds of deliberations, the CoC approved a Resolution Plan in July 2025.

Dahiya challenged the Resolution Plan, alleging that he was denied timely access to the Resolution Plan, valuation reports and CoC minutes. He further contended that the CoC failed to record deliberations on the feasibility and viability of the plan as required under Regulation 39(3)(b) of the CIRP Regulations. He also argued that the Resolution Plan did not adequately provide for provident fund dues and contained provisions seeking to extinguish rights and obligations arising from personal guarantees, which could not be dealt with through the resolution process.

The Resolution Professional (RP) opposed the application, submitting that all notices and CoC meeting minutes were circulated to Dahiya through email in compliance with Regulation 24(7) of the CIRP Regulations. The RP stated that the CoC had deliberated on the feasibility and viability of the plans after receiving and evaluating fresh Resolution Plans.

Regarding provident fund dues, the RP submitted that no claim was filed by the Employees' Provident Fund Organisation (EPFO), Employees' State Insurance (ESI) Department or any workman during the CIRP despite due intimation.

The Bench first considered whether a suspended director could challenge an approved Resolution Plan. Referring to the Supreme Court's judgment in Vijay Kumar Jain v. Standard Chartered Bank, it held that suspended directors retain participatory rights in the CIRP and can bring statutory violations or procedural irregularities to the NCLT's notice.

However, it clarified that such rights remain limited under the IBC framework. A suspended director cannot challenge the CoC's commercial wisdom or seek reconsideration of the commercial terms of a Resolution Plan. Its review is limited to examining compliance with Section 30(2) of the IBC (conditions a Resolution Plan must satisfy before approval) and identifying material irregularities in the CIRP.

Further, it found that the CoC minutes reflected deliberations on competing plans, negotiations and evaluations. It held that Regulation 39(3)(b), which requires the CoC to record reasons for approving or rejecting Resolution Plans, does not require detailed reasoning for every commercial consideration. It observed:

“Merely because the Minutes do not contain a detailed evaluation of every commercial consideration taken into account by the Committee does not lead to the conclusion that Regulation 39(3)(b) stands violated.”

The Bench also noted that no claims were filed by EPFO or employees during the CIRP and that the Resolution Plan provided a contingent amount for statutory dues. It further observed that the plan contemplated assignment of rights arising from the personal guarantee of Santosh Kumari to the Asset Reconstruction Company of the successful applicant.

It held that the arrangement did not extinguish the guarantor's liability or bring independent assets into the resolution estate. It concluded that the application did not establish any violation of the IBC or CIRP Regulations and reiterated that challenges relating to feasibility, viability or commercial terms of a Resolution Plan cannot be entertained in view of the CoC's commercial wisdom.

Accordingly, the NCLT dismissed the application.