Section 21: Committee of Creditors - Constitution, Powers and Voting Rights
Section 21 establishes how the committee of creditors (CoC) is constituted during the corporate insolvency resolution process (CIRP), who may participate, how financial creditors are represented and what voting rights they exercise.
What is a committee of creditors?
The CoC is the creditor decision-making body constituted by the interim resolution professional after claims are collated. Under section 5(7), a financial creditor is a person to whom a financial debt is owed, including an assignee or transferee of that debt. Financial debt is defined in section 5(8); operational creditor and operational debt are defined in sections 5(20) and 5(21). Related party in relation to a corporate debtor is defined in section 5(24). The statutory definitions and exceptions govern individual cases.
Section 21 explained subsection by subsection
21(1) - Formation of the committee
After collating claims and determining the financial position of the corporate debtor, the interim resolution professional (IRP) constitutes the committee of creditors (CoC).
21(2) - Financial creditors and related parties
The CoC ordinarily comprises financial creditors. A financial creditor or its authorised representative that is a related party of the corporate debtor is generally excluded from representation, participation and voting. A limited statutory exception applies to certain creditors regulated by a financial sector regulator where related-party status results solely from specified debt-to-equity conversion or similar prescribed transactions before commencement.
21(3) - Consortium lending
Subject to subsections (6) and (6A), financial creditors under a consortium or similar agreement are represented according to the financial debt owed to each.
21(4) - Dual-status creditors
A creditor holding both financial and operational debt is treated as a financial creditor for the financial-debt portion and an operational creditor for the operational-debt portion. Only the eligible financial-debt portion determines its CoC voting share.
21(5) - Assignment of operational debt
Assignment of operational debt to a financial creditor does not turn that assigned operational debt into financial debt. The assignee remains an operational creditor to that extent.
21(6) - Syndicated facilities
Where a consortium or syndicated arrangement provides for a common trustee or agent, a financial creditor may authorise the agent, represent itself, appoint another insolvency professional at its own cost, or exercise voting rights jointly or severally, as permitted by the provision.
21(6A) - Authorised representatives
The Code provides representation through a trustee or agent for specified securities or deposits, an insolvency professional appointed through the Adjudicating Authority for qualifying classes of creditors, and a guardian, executor or administrator where applicable. Representatives attend and vote for the financial creditors they represent.
21(6B) - Representative remuneration
Fees of authorised representatives are governed by the applicable financial-debt terms or documents for the specified categories; fees of an authorised representative appointed for a class under section 21(6A)(b) are treated as insolvency resolution process costs as specified.
21(7) - Voting mechanism
The Insolvency and Bankruptcy Board of India (IBBI) may specify the voting method and determination of voting shares for debts covered by subsections (6) and (6A).
21(8) - Decision threshold
Unless another provision of the Code requires a different majority, CoC decisions require at least 51 percent of financial creditors' voting share. The older 75 percent general threshold appearing in the uploaded page is outdated. Certain major decisions require 66 percent under other provisions, including sections 28 and 30(4). Where there are no financial creditors, the committee is constituted under the prescribed regulatory framework.
21(9) - Information rights
The CoC may request financial information about the corporate debtor from the resolution professional at any time during the corporate insolvency resolution process.
21(10) - Seven-day response
The resolution professional must supply the financial information requested under subsection (9) within seven days of the request.
How CoC voting works
Voting shares generally reflect the eligible financial debt owed to each creditor, subject to the Code and applicable regulations. The default 51 percent threshold under section 21(8) must not be confused with the 66 percent threshold required for particular decisions, such as approval of a resolution plan under section 30(4) or specified actions under section 28. Authorised representatives and creditors in a class are subject to additional statutory voting rules, including section 25A.
Relevant laws and official sources
Read the Insolvency and Bankruptcy Code, 2016 on India Code, the IBBI legal framework, and the IBBI regulations and amendments. Consult the currently applicable CIRP Regulations for procedural requirements on constitution, meetings and voting.
Frequently asked questions
Can an operational creditor vote in the CoC?
Ordinarily, an operational creditor does not have CoC voting rights solely because it holds operational debt. Special rules apply where there are no financial creditors and in other circumstances specified by law.
Can a related-party financial creditor participate?
Section 21(2) generally excludes related-party financial creditors and their relevant representatives from representation, participation and voting, subject to the limited statutory exception described above.
How quickly must financial information be supplied?
Under section 21(10), the resolution professional must provide information requested under section 21(9) within seven days.
This article explains the statutory framework for general information. Consult the current Act, applicable regulations and judicial decisions for any particular insolvency proceeding.