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

Lenders with vested interest shouldn't be in CoC: NCLT
New Delhi, April 15 (IANS) In a decision likely to have major impact on insolvency proceedings, the Chennai bench of the National Company Law Tribunal (NCLT) has said that any lender with vested interest in, or having relations with, a corporate debtor should not be part of the Committee of Creditors (CoC) in a resolution process.

According to media reports, on an application moved by the Asset Reconstruction Company (India) Ltd (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 bankruptcy 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 debt 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 insolvency 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 Insolvency Resolution Professional (IRP).

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

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

About Gopi Adusumilli

Gopi Adusumilli is a Programmer. He is the editor of SocialNews.XYZ and President of AGK Fire Inc. He enjoys designing websites, developing mobile applications and publishing news articles on current events from various authenticated news sources. When it comes to writing he likes to write about current world politics and Indian Movies. His future plans include developing SocialNews.XYZ into a News website that has no bias or judgment towards any. He can be reached at gopi@socialnews.xyz

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