The Supreme Court has held that a debenture holder and lender exercising pervasive control over a corporate debtor’s management and projects is a “related party” under Section 5(24) of the Insolvency and Bankruptcy Code, 2016 (IBC), and cannot be part of the Committee of Creditors (CoC). A Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran dismissed appeals filed by ECL Finance Ltd. and IDBI Trusteeship Services Ltd., upholding their exclusion from the CoC of Palm Developers Private Limited.
Background
The claims arose from a Debenture Trust Deed dated 13.05.2016 and a Facility Agreement dated 22.09.2017. Palm Developers, the corporate debtor, stood as guarantor to Saha Infratech Private Limited (SIPL), which…