Supreme Court bars lender influencing debtor policy from joining CoC

The case concerns whether ECL Finance Ltd. and IDBI Trusteeship Services Limited, acting as a lender and debenture trustee, are 'related parties' to the Corporate Debtor (Palm Developers Private Limited) under the Insolvency and Bankruptcy Code, 2016, and thus ineligible to participate in the Committee of Creditors (CoC).

Who it concerns: Appellants: ECL Finance Ltd. and IDBI Trusteeship Services Limited (ITSL). Respondents: Abhinav Mukherjee and others. Bench: Justice K. Vinod Chandran.

What the court decided

• The Court found that the NCLAT erred in holding that the appellants' claims could not be entertained because the corporate guarantee was not invoked prior to the commencement of the Corporate Insolvency Resolution Process (CIRP).
• The Court held that a corporate guarantee constitutes financial debt under Section 5(8) of the IBC, even if not invoked before the CIRP commenced, relying on the decision in China Development Bank v. Doha Bank Q.P.S.C.
• The Court affirmed that an individual financial creditor has the locus to object to the inclusion of other creditors in the CoC, even if an Authorized Representative (AR) exists for the class of creditors.
• The Court noted that the NCLT misread the precedent in Anuj Jain v. Axis Bank regarding the definition of financial debt involving guarantees.
• The Court identified the remaining question to be decided as whether the appellants are 'related parties' under Section 5(24)(m)(i) of the IBC due to participation in policy-making processes, which would exclude them from the CoC under Section 21(2).

Also in the document

• The judgment is marked as 'Reportable' (2026 INSC 1159).
• The Court distinguished between the status of ECL as a Lender and as a Debenture Holder, noting the Corporate Debtor had dual obligations to secure ECL's interests.
• The Court relied on the principle from Phoenix ARC Private Limited v. Spade Financial Services Limited that orders passed without hearing the challenging financial creditors do not bring in res judicata.