NCLAT Curbs CoC Powers: Approved Insolvency Resolution Plans Are Immutable and Cannot Be Modified to Reallocate Dissenting Creditor Funds

The National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, has delivered a significant ruling reinforcing the sanctity and finality of approved resolution plans under the Insolvency and Bankruptcy Code, 2016 (IBC). In its judgment dated 8 April 2026 in Indian Bank and Ors. v. State Bank of India and Ors. [Company Appeal (AT) (Ins.) No. 629 of 2024], the Tribunal held that neither the Committee of Creditors (CoC) nor a Monitoring Committee constituted under a resolution plan has the authority to revisit, modify, or alter the distribution mechanism or creditor entitlements once the plan has been approved by the CoC and the Adjudicating Authority. The ruling carries substantial implications for insolvency practitioners, financial creditors, and resolution applicants across India.

Background of the Case

The dispute arose in the corporate insolvency resolution process (CIRP) of OCL Iron and Steel Ltd. A resolution plan submitted by successful applicant Indrani Patnaik was approved by the Committee of Creditors with an 88.98% voting share and subsequently sanctioned by the NCLT, Cuttack Bench. As part of the plan, the CoC had expressly resolved during its 18th and 19th meetings that distribution to secured financial creditors, including dissenting ones, would be based on the liquidation value attributable to their respective security interests. An independent evaluation advisor was appointed to determine this liquidation value, and the advisor's report formed the foundation of the distribution framework incorporated into the approved resolution plan.

State Bank of India (SBI), a dissenting financial creditor, was entitled to receive Rs. 64.56 crores based on the liquidation value determined by the evaluation advisor. However, the Monitoring Committee, constituted to oversee the implementation of the resolution plan, subsequently reduced the amount payable to SBI from Rs. 64.56 crores to Rs. 35.2 crores. Aggrieved by this unilateral reduction, SBI approached the NCLT, Cuttack Bench, which allowed SBI's application and directed payment in accordance with the liquidation value as originally determined under Section 30(2)(b) of the IBC.

The assenting financial creditors, led by Indian Bank, challenged the NCLT's order before the NCLAT.

The NCLAT's Ruling and Legal Reasoning

The bench of Chairperson Justice Ashok Bhushan and Technical Member Indevar Pandey dismissed the appeal and upheld the NCLT's order. The Tribunal undertook a detailed analysis of the relevant provisions of the IBC, the CIRP Regulations, and the specific clauses of the approved resolution plan.

The NCLAT emphasised that once a resolution plan is approved by the CoC in exercise of its commercial wisdom and subsequently sanctioned by the Adjudicating Authority under Section 31 of the IBC, the plan attains finality and becomes binding on all stakeholders. This includes the CoC itself and any committee constituted for the plan's implementation.

On the role of the Monitoring Committee, the Tribunal observed:

"The Monitoring Committee which is constituted by the CoC, only for a limited purpose of supervising and facilitating the implementation of the approved plan, cannot assume the role of the CoC or the Adjudicating Authority to revisit or modify the terms of the plan. Any attempt to alter the distribution mechanism at this stage would amount to rewriting the Resolution Plan itself, which is impermissible and contrary to the scheme of the Code. The sanctity and finality attached to an approved Resolution Plan cannot be diluted by subsequent decisions of the Monitoring Committee."

The Tribunal further clarified the statutory protection available to dissenting financial creditors under Section 30(2)(b) of the IBC, which mandates that dissenting financial creditors must receive at least the amount they would have received in liquidation. In this case, the liquidation value attributable to SBI had been determined through an independent evaluation process and was not challenged at the relevant stage. The Monitoring Committee's attempt to reduce this amount was therefore found to be beyond its jurisdiction and contrary to the binding framework established by the CoC and the Adjudicating Authority.

The NCLAT also distinguished the present case from the Supreme Court's decision in India Resurgence ARC Pvt. Ltd. v. Amit Metaliks Ltd., noting that SBI was not seeking any amount beyond its liquidation value and that the dispute centred on the impermissible modification of the approved distribution mechanism.

Reinforcing an Earlier Precedent

This ruling builds upon and reinforces the NCLAT's earlier decision in Bank of Baroda v. IDBI Bank Limited [Company Appeal (AT) (Insolvency) No. 1708 of 2025], delivered on 23 December 2025 by a bench comprising Justice Ashok Bhushan (Chairperson) and Technical Member Barun Mitra. In that case, the Tribunal dismissed Bank of Baroda's appeal in the insolvency proceedings of Reliance Communications Infrastructure Limited (RCIL). Bank of Baroda had sought the reallocation of the Reliance Bhutan Loan to dissenting financial creditors through a post-approval resolution by the CoC. The NCLAT held that while the CoC can exercise its commercial wisdom on all aspects of a resolution plan, including the manner of distribution, this authority is limited to the stage of plan approval. Once approved, the distribution mechanism becomes binding and cannot be altered, even in the name of the CoC's commercial wisdom.

Interaction with the IBC Amendment Act, 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026, which received the President's assent on 6 April 2026, introduces a new Section 30(2)(ba) that stipulates a dissenting financial creditor shall be entitled to the lower of the value arrived at under the resolution plan or the value they would have received in liquidation. This amendment reportedly aims to address the issue of strategised dissent by financial creditors who might force a corporate debtor into liquidation despite the availability of a viable resolution plan.

While the effective date of the new provision is yet to be notified by the Central Government, the NCLAT's ruling in the OCL Iron and Steel case was delivered under the existing framework, where Section 30(2)(b) requires that dissenting financial creditors receive at least the liquidation value. The interplay between this ruling and the incoming amendment will likely be a point of keen scrutiny by practitioners, particularly in pending resolution processes. For a broader understanding of recent regulatory changes to the insolvency framework, readers may also refer to the IBBI CIRP (Third Amendment) Regulations 2026 and the IBBI Voluntary Liquidation Process Amendment Regulations 2026.

Key Takeaways for Stakeholders

• Approved resolution plans are final and binding on all stakeholders, including the CoC and any Monitoring Committee constituted under the plan.

• A Monitoring Committee's mandate is limited to supervising and facilitating implementation. It cannot revisit or modify the distribution mechanism or creditor entitlements fixed under an approved plan.

• The CoC's commercial wisdom, while broad, is limited to the stage before the plan's approval. Post-approval modifications to the financial distribution framework are impermissible.

• Dissenting financial creditors are protected under Section 30(2)(b) of the IBC and must receive at least the liquidation value attributable to their security interest, as determined during the CIRP.

• Any attempt to reallocate funds earmarked for dissenting creditors effectively amounts to rewriting the resolution plan, which the IBC does not permit.

Broader Implications

The ruling reinforces the principle that the insolvency resolution process under the IBC is designed to provide certainty and finality to all stakeholders. By drawing a clear boundary around the powers of the CoC and the Monitoring Committee, the NCLAT has strengthened the rights of dissenting creditors who might otherwise face post-approval erosion of their legitimate entitlements.

This decision is particularly relevant for financial creditors evaluating their options during the CIRP, resolution applicants seeking clarity on the binding nature of their approved plans, and insolvency professionals tasked with overseeing plan implementation. The ruling also underscores the importance of establishing robust and transparent distribution mechanisms during the plan formulation stage, as these cannot be revisited once the plan achieves finality. For entities considering resolution processes under the IBC, it may be useful to understand the pre-packaged insolvency route available for MSME corporate debtors. The NCLAT has also separately clarified jurisdictional boundaries by ruling that financial service providers cannot be subjected to CIRP under the IBC.

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Case Details

Case Name: Indian Bank and Ors. v. State Bank of India and Ors.

Case Number: Company Appeal (AT) (Ins.) No. 629 of 2024

Bench: Chairperson Justice Ashok Bhushan and Technical Member Indevar Pandey

Date of Judgment: 8 April 2026

Citation: (2026) ibclaw.in 456 NCLAT

Corporate Debtor: OCL Iron and Steel Ltd.