Case Note & Summary
The National Company Law Appellate Tribunal (NCLAT) Chennai Bench, in a larger bench of three members, addressed a reference question: whether a shareholder/promoter is an 'aggrieved person' under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) and has locus to challenge an order admitting a Section 7 application. The reference arose from conflicting decisions by two-member benches: one in Park Energy Private Limited v. State Bank of India (17.11.2023) held that shareholders are 'aggrieved persons', while another in Nirej Vadakkedathu Paul v. Sunstar Hotels and Estates Private Limited (27.02.2023) held they have no locus. The larger bench, per Justice Sharad Kumar Sharma, examined the definition of 'aggrieved person' under Section 61 IBC and concluded that the term is broad enough to include any person whose legal rights are adversely affected by the admission order. The court noted that shareholders/promoters, being part of the corporate debtor's management and having a stake in the company, are directly impacted by the initiation of corporate insolvency resolution process (CIRP). The bench overruled the view in Nirej Vadakkedathu Paul and affirmed the view in Park Energy, holding that shareholders/promoters have locus to appeal against admission orders under Section 7 or Section 9 IBC. The judgment emphasizes that the right to appeal under Section 61 is not restricted to the corporate debtor or financial creditor alone but extends to any person who can demonstrate that they are aggrieved by the order. The decision resolves the conflict and provides clarity on the maintainability of appeals by shareholders in insolvency proceedings.
Headnote
A) Insolvency Law - Locus Standi - Aggrieved Person - Section 61, Insolvency and Bankruptcy Code, 2016 - The issue was whether a shareholder/promoter is an 'aggrieved person' under Section 61 IBC and has locus to challenge an order admitting a Section 7 application. The larger bench held that a shareholder/promoter whose rights are affected by the admission order is an 'aggrieved person' and has locus to appeal. The court reasoned that the term 'aggrieved person' is not limited to the corporate debtor or financial creditor but includes any person whose legal rights are adversely impacted. (Paras 1-36) B) Insolvency Law - Conflict of Decisions - Reference to Larger Bench - Section 61, Insolvency and Bankruptcy Code, 2016 - Two conflicting views existed: one bench held shareholders have no locus, another held they do. The larger bench resolved the conflict by holding that shareholders/promoters are 'aggrieved persons' under Section 61 IBC. (Paras 2-3)
Issue of Consideration
Whether a shareholder/promoter falls within the ambit of an 'aggrieved person' as provided under Section 61 of the I & B Code, 2016, and has a locus to challenge the order of admission of Section 7/Section 9 application.
Final Decision
The larger bench held that a shareholder/promoter is an 'aggrieved person' under Section 61 of the IBC, 2016, and has locus to challenge the order of admission of a Section 7 or Section 9 application. The view in Park Energy Private Limited v. State Bank of India is affirmed, and the view in Nirej Vadakkedathu Paul v. Sunstar Hotels and Estates Private Limited is overruled.
Law Points
- Shareholder/promoter is an 'aggrieved person' under Section 61 of IBC
- 2016
- Locus standi to challenge Section 7 admission order
- Interpretation of 'aggrieved person' includes persons whose rights are affected
- Conflict of views resolved by larger bench
