Can a resolution plan proceed to CoC voting when a substantial creditor’s claim remains disputed on limitation? NCLAT in ARC(I)L v. Umesh Garg

Can a resolution plan proceed to Committee of Creditors (CoC) voting when a substantial creditor’s claim remains disputed on limitation? This issue came before the National Company Law Appellate Tribunal (NCLAT) in Asset Reconstruction Company (India) Ltd v Umesh Garg¹. The NCLAT kept in abeyance the order of the National Company Law Tribunal (NCLT), Chandigarh, which had upheld the rejection of Asset Reconstruction Company (India) Ltd.’s (ARCIL) ₹3,482 crore claim against JCT Ltd. The appellate tribunal held that the issue of limitation should be decided before the resolution plan is put to vote.

JCT Ltd. had executed corporate guarantees in favour of IFCI Ltd. in relation to credit facilities extended to its subsidiary, JCT Electronics Ltd. Following default, IFCI invoked the guarantees in January 2002. The debt was subsequently assigned to ARCIL in 2015.

After JCT Ltd. entered CIRP in October 2024, ARCIL submitted a claim of approximately ₹3,482 crore. The Interim Resolution Professional provisionally admitted approximately ₹56.68 crore and inducted ARCIL into the CoC with around 20% voting share, while the balance claim remained under verification. The RP subsequently rejected ARCIL’s claim in January 2026, citing, inter alia, limitation and deficiencies in the documents submitted in support of the claim.

ARCIL challenged the rejection before the NCLT. On 10 July 2026, the NCLT Chandigarh upheld the RP’s decision, finding the claim to be time-barred. The NCLT held that limitation ran either from the invocation of the guarantees in January 2002 or, at the latest, from the subsequent default under the rehabilitation scheme in April 2011. It also rejected ARCIL’s reliance on subsequent balance-sheet entries as acknowledgments of liability because those entries contained express caveats disputing the legal sustainability of ARCIL’s claim.

ARCIL thereafter approached the NCLAT.

ARCIL contended that its exclusion from the CoC could materially prejudice it because, if its claim were ultimately accepted, its voting share would be substantially higher. The dispute therefore had consequences extending beyond the amount ultimately payable to ARCIL. It potentially affected the constitution of the CoC and the voting dynamics surrounding the resolution plan.

The respondents, on the other hand, relied upon the provisional nature of the earlier admission and the RP’s power to verify and revise claims. They maintained that ARCIL’s claim had been rejected following verification and that the CIRP should not be stalled merely because the creditor had challenged that rejection.

NCLAT’S Decision & Why The Timing Of The Dispute Matters

The NCLAT adopted a cautious approach. A Bench comprising Officiating Chairperson Justice Yogesh Khanna and Technical Member Barun Mitra noted that the RP had not called for the relevant documentation for a considerable period and subsequently rejected the claim on the ground of limitation. The Tribunal considered the circumstances relevant because the limitation issue was not a purely mechanical question.

Most importantly, the NCLAT observed that limitation was a mixed question of law and fact in the circumstances of the case. ARCIL had relied upon, among other things, the pending DRT proceedings and the BIFR rehabilitation scheme in resisting the limitation objection. The NCLAT therefore considered that these issues required adjudication before the resolution process reached the stage of CoC voting.

The Tribunal’s principal concern was the potential irreversibility of proceeding with the vote. It observed:

“the issues needs to be decided prior to any plan is put to vote, as once the CoC goes ahead, the position as of today could never be restored.”

The NCLAT accordingly kept the NCLT’s order in abeyance. It did not finally rule that ARCIL’s claim was within limitation, nor did it direct that the entire ₹3,482 crore claim be admitted. Instead, it preserved the position pending adjudication of the limitation dispute.

The significance of the decision lies in the distinction between an ordinary claim dispute and a claim dispute that may materially alter CoC voting rights at the point of plan approval.

ARCIL had previously been admitted into the CoC with approximately 20% voting share. Its subsequent exclusion therefore had a direct bearing on the composition of the CoC. If the claim were eventually upheld, a resolution plan voted upon without ARCIL could have been considered without the participation of a creditor whose voting entitlement was potentially substantial. Conversely, if ARCIL’s claim were ultimately found to be time-barred, permitting it to exercise voting rights could itself affect the decision-making process.

The NCLAT’s approach seeks to avoid both possibilities by postponing the irreversible step of voting until the underlying dispute is addressed.

This is not, however, a blanket proposition that every disputed creditor claim must halt a CIRP. The order is closely tied to its facts: ARCIL was a substantial creditor, its claim had previously been provisionally admitted, it had participated in the CoC, the rejection of its claim was under challenge, and the resolution plan was at the stage of being put to vote.

Conclusion

The order passed by NCLAT illustrates a recurring tension within insolvency law. The IBC places considerable emphasis on completing the CIRP within prescribed timelines and avoiding unnecessary delays. At the same time, the legitimacy of the CoC’s commercial decision depends upon the proper determination of the creditors entitled to participate in that decision.

The NCLAT’s intervention should therefore be understood as a measure aimed at preserving the integrity of the decision-making process rather than as an endorsement of delaying tactics by creditors.

The Tribunal did not substitute its assessment of ARCIL’s claim for that of the RP or NCLT. Instead, it recognised that where the rejection of a substantial claim is itself under challenge and the determination may materially affect voting rights, proceeding with CoC voting may produce consequences that cannot subsequently be undone.

Asset Reconstruction Company (India) Ltd v Umesh Garg raises a focused but important question for the conduct of CIRP: should a resolution plan be put to CoC vote when a substantial creditor’s exclusion from the CoC is founded upon a claim rejection that remains under challenge on limitation?

At the interim stage, the NCLAT’s reasoning indicates that the plan should await determination of the issue where the disputed claim may materially affect the CoC and the limitation question involves mixed questions of law and fact.

The decision does not finally determine ARCIL’s entitlement. Its immediate significance is procedural. It recognises that while the IBC values speed, an expeditious vote cannot justify proceeding with a potentially irreversible CoC decision when the voting entitlement of a substantial creditor remains legally uncertain.

The decision highlights the importance of resolving material claim disputes before the CIRP reaches the decisive stage of resolution-plan voting. The ultimate outcome of ARCIL’s limitation dispute will determine the substantive position, but the NCLAT’s interim intervention reflects an important principle of caution: where the composition of the CoC itself may change depending upon the outcome of a pending claim dispute, the voting process may need to wait.

Citations

1. Asset Reconstruction Company (India) Ltd v Umesh Garg, Company Appeal (AT) (Insolvency) No. 1246 of 2026 ↩︎

Expositor(s): Adv. Vatsala