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Lenders with vested interest shouldn't be in CoC: NCLT

IANS  |  New Delhi 

In a decision likely to have major impact on proceedings, the Chennai bench of the National Company Tribunal (NCLT) has said that any lender with vested interest in, or having relations with, a corporate debtor should not be part of the (CoC) in a resolution process.

According to media reports, on an application moved by the (Arcil) in a case relating to a corporate debtor, Anandram Developers, the tribunal said that the decisions of the CoC must remain independent.

A CoC is a group of persons representing a company's creditors in a proceeding. As such, a creditors' committee has broad rights and responsibilities, including devising a reorganisation plan for bankrupt companies or deciding whether they should be liquidated. The creditors' committee is usually further divided between secured and unsecured creditors.

The bench noted that as the CoC's decisions will impact the debtor's survival or liquidation, as well as the realisation of all the creditors, the institution of CoC needs to be completely independent and free from any kind of influence, either of the promoters or their close relatives who may have stakes.

The decision will have a significant and far-reaching impact on other cases in the process as it sets a benchmark for the lenders to become a part of the CoC. It is also likely to bring in transparency in the resolution process.

The tribunal held that the second respondent, Anandcine Services, is a "related party", which would have no right of representation, participation or voting in CoC meetings. The first respondent in the case was the Resolution Professional (IRP).

--IANS

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, April 15 2019. 15:24 IST
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