NCLAT REITERATES THAT THE COC MAY REPLACE THE RESOLUTION PROFESSIONAL AT ANY STAGE OF THE CIRP WITHOUT ASSIGNING REASONS

The Hon’ble NCLAT, in its order dated September 2, 2026, in Indian Bank v. Nimitaya Hotel & Resorts Ltd., addressed the critical issue of whether the Adjudicating Authority could examine the reasons for, and the timing of, a decision of the CoC to replace the RP under Section 27 of the IBC.

The appeals arose from three orders of the Ld. NCLT, Special Bench, New Delhi dated July 7, 2026, July 16, 2026 and August 14, 2026. The CoC had approved a resolution plan on January 8, 2023, but the application for its approval remained pending for more than two years. The appellant bank thereafter sought dismissal of the resolution plan and permission to issue a fresh Form G, and, after the CoC voted to replace the RP, filed an application seeking such replacement.

The Ld. NCLT questioned the Deputy General Manager of the appellant bank on the reasons for the belated replacement, observed that he could only cite “loss of trust”, directed that its order be sent to the Chairman of the bank for action against him, and issued notice to the RP on the replacement application.

The Appellant contended that Section 27 of the IBC requires only a 66% vote of the CoC and intimation to the Adjudicating Authority, does not contemplate notice to the RP, and does not require the CoC to give reasons. It was also pointed out that the RP had subsequently been suspended by the IBBI for a period of one year.

The Hon’ble NCLAT, while disposing of the appeals, held as follows: 

1. The CoC is fully empowered to replace the RP by following the procedure under Section 27 of the IBC, and is not required to give reasons for the change.

2. Such a decision cannot be interfered with by the Adjudicating Authority or the NCLAT unless it disturbs the foundational principles of the IBC, and the substitution of the wisdom of the CoC by the Adjudicating Authority has always been deprecated.

3. Moving the replacement application after two and a half years does not disturb any foundational principle, since Section 27 of the IBC itself empowers the CoC to replace the RP at any time during the CIRP.

Conclusion:

The ruling seems to reaffirm the limited, “check-box” role of the Adjudicating Authority in the replacement of an RP, confined to verifying the requisite vote share and the written consent of the proposed RP. Furthermore, it serves as a reminder that the relationship between the CoC and the RP is one of confidence, and a loss of such confidence is reason enough for replacement.