Shareholders Cannot Challenge Initiation of Insolvency Proceedings Under IBC: NCLAT

The National Company Law Appellate Tribunal (NCLAT), comprising Justice Ashok Bhushan and Technical Member Indevar Pandey, dismissed an appeal by Peninsula Holdings challenging the initiation of insolvency proceedings against Hem Infrastructure.

The Tribunal held that shareholders, including those holding controlling or preference shares, cannot be considered “persons aggrieved” under Section 61 of the Insolvency and Bankruptcy Code unless they suffer direct legal or financial injury.

Mere dilution of shareholding or financial loss from insolvency proceedings does not grant locus standi. NCLAT emphasised that permitting such challenges would contradict the objectives of the Code and result in multiplicity of proceedings, upholding the NCLT Mumbai order.

[Peninsula Holdings and Investments Pvt. Ltd. v. JM Financial Credit Solutions Ltd. & Ors.]