Authority: National Company Law Tribunal, Ahmedabad Bench (Court II)

Order Date: 14 July 2026

Case Overview

This application was filed by Bank of India, a financial creditor of Jaybharat Textiles and Real Estate Limited (Corporate Debtor), under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor was admitted into CIRP on 03 January 2020 with Mr. Naren Sheth appointed as Resolution Professional (RP).

The applicant alleged that the RP admitted inflated claims from unsecured financial creditors who were related parties of the Corporate Debtor, giving them 72.19% voting share in the Committee of Creditors (CoC) while reducing secured financial creditors to 27.81%. The applicant provided a detailed chart showing common directorships and shareholding patterns between the Corporate Debtor and 18 respondent companies, all belonging to the Tayal group. Against a principal amount of Rs. 249.50 crores, claims aggregating to Rs. 1,587 crores were admitted, which were not reflected in the Corporate Debtor's financial statements.

The RP defended his actions, stating he admitted claims based on loan documents and financial contracts, including contractual interest on loans advanced 8-10 years prior to insolvency commencement. Respondents 6-11 argued they were not related parties and relied on the Supreme Court judgment in Phoenix ARC Private Limited v. Spade Financial Services Limited.

The Tribunal noted that the RP had been suspended by IBBI's Disciplinary Committee on 30 January 2024 for contravention of IBC provisions but continued pursuing the matter without authorization. The RP repeatedly failed to comply with NCLAT and NCLT orders to produce Form C documents of unsecured creditors. The Tribunal observed that the Corporate Debtor was declared a wilful defaulter in May 2016 with an FIR filed with CBI, and questioned how the RP could admit claims not shown in the balance sheet, suggesting possible collusion.

Final Outcome

The Tribunal partly allowed the application and: (1) dissolved the entire CoC; (2) appointed Mr. Sunil Kumar Agarwal (IBBI Registration No. IBBI/IPA-001/IP-P01390/2018-2019/12178) as new RP; (3) directed the new RP to re-verify all claims as per the books of the Corporate Debtor from 2010 and file a fresh list of admitted claims; (4) stated that all pending applications would be dealt with accordingly as the CoC is reconstituted; (5) authorized the new RP to file for liquidation under Section 33 of IBC if records are not available from the suspended RP.

Topics: Related Party Claims, Committee of Creditors Composition