SC disqualifies ECL Finance from Committee of Creditors for holding policy-making rights, confirming its status as a related party under IBC.
Supreme Court Bars ECL Finance from CoC Over Related-Party Ties
The Supreme Court has upheld the exclusion of ECL Finance from the Committee of Creditors (CoC) in a corporate insolvency case, ruling that its structural control and policy-making rights rendered it a 'related party' under Section 5(24) of the Insolvency and Bankruptcy Code (IBC), 2016.
The Court found that ECL Finance, despite being a financial creditor, exercised influence over the corporate debtor through interlinked board appointments and loan covenants enabling operational control. The bench noted that such influence compromises the CoC’s independence, essential for fair resolution. The decision aligns with the disqualification framework under IBC, particularly Rule 10A of the CIRP Regulations.
This reinforces the scrutiny on financial institutions’ roles in insolvency. Lenders with governance influence — even indirectly — risk disqualification from CoC, affecting their voting power and plan approval dynamics. Compliance with IBC’s conflict-of-interest norms is now non-negotiable.
Citations
- In re: ECL Finance Ltd. (2026) SCC Online SC