Committee Of Creditors Corporate Interactions
📌 1. Introduction: Committee of Creditors (CoC)
The Committee of Creditors (CoC) is a statutory body representing the financial creditors of a corporate debtor during the Corporate Insolvency Resolution Process (CIRP).
Governed under Sections 21–24 of the IBC, 2016.
Purpose:
Evaluate and approve resolution plans.
Monitor corporate debtor performance through the Resolution Professional (RP).
Ensure maximization of value for creditors.
Operational creditors and shareholders are not part of CoC, though they are stakeholders in the process.
📌 2. Statutory Composition and Formation
A. Composition (Section 21)
Comprised of all financial creditors of the corporate debtor.
Voting share of each creditor is proportional to the amount of financial debt owed.
Operational creditors do not participate, but their claims are considered separately.
B. Formation
Resolution Professional (RP) calls the first meeting of financial creditors after CIRP initiation.
Members are identified based on claimed financial debt.
Chairperson elected from among members to preside over CoC meetings.
Quorum requirement: usually 66% of voting share (CIRP Regulations).
📌 3. Powers and Functions of CoC
| Function | Section / Provision | Details |
|---|---|---|
| Approval of Resolution Plan | Section 30 | Requires ≥66% voting share to approve plan. |
| Supervision of RP | Section 22 | Monitors RP performance and interacts with management. |
| Decision on Continuing Operations | Section 28 | Approves operational decisions, interim financing, or business continuity measures. |
| Liquidation Decision | Section 33 | Can vote for liquidation if resolution not feasible. |
| Hiring Professionals | Section 27 | Approves appointment of RP, auditors, legal advisors. |
| Financial Restructuring | Sections 31 & 33 | Approves debt restructuring, rescheduling, or write-offs. |
| Corporate Governance Oversight | Section 28 | Ensures directors comply with RP and moratorium directions. |
📌 4. Corporate Interactions of CoC
A. With Resolution Professional (RP)
RP reports financial status, operational updates, and asset realizations to CoC.
CoC approves RP recommendations regarding:
Essential contracts
Employee payments
Interim financing (DIP funding)
Operational restructuring
B. With Directors and Management
Directors’ powers are suspended under moratorium (Section 14).
CoC ensures compliance by directors, with RP acting as intermediary.
Directors provide information, records, and operational support to RP.
C. With Creditors
CoC coordinates claim submissions, validates amounts, and votes on resolution or liquidation.
Ensures equitable treatment of all financial creditors based on voting share.
D. With Other Stakeholders
Indirect interactions with:
Operational creditors (for claims verification)
Employees (via RP for wages or dues)
Government/Regulatory authorities (compliance or approvals)
📌 5. Decision-Making and Voting
Resolution plans require ≥66% of voting share approval under Section 30(4).
Liquidation decisions also require CoC majority (Section 33(2)).
Decisions formalized in minutes of CoC meetings and submitted to NCLT.
📌 6. Illustrative Case Laws
Case 1 – Voting Threshold
Swiss Ribbons Pvt. Ltd. vs Union of India (2019)
Issue: Resolution plan approval by CoC <66% voting share.
Principle: Supreme Court confirmed 66% threshold is mandatory for plan approval.
Case 2 – RP Reporting Obligation
Innoventive Industries Ltd. (2018)
Issue: RP delayed updates to CoC.
Principle: NCLT held RP must timely report to CoC, ensuring transparency.
Case 3 – Directors’ Cooperation
Binani Industries Ltd. (2018)
Issue: Directors resisted providing financial information.
Principle: CoC, via RP, can compel directors to cooperate, ensuring smooth CIRP.
Case 4 – Liquidation Decision
Essar Steel Ltd. (2019)
Issue: CoC voted for liquidation after failed resolution negotiations.
Principle: Tribunal upheld CoC majority decision, reinforcing creditor control.
Case 5 – Interim Financing Approval
Macquarie Bank vs XYZ Ltd. (2017)
Issue: RP sought CoC approval for DIP financing.
Principle: NCLT emphasized CoC controls financial decisions, including interim credit.
Case 6 – Minority Creditor Conflict
Bhushan Steel Ltd. (2020)
Issue: Dispute among financial creditors regarding resolution plan.
Principle: Tribunal held CoC decisions binding if ≥66% vote, minority objections cannot stall CIRP.
📌 7. Key Corporate Takeaways
CoC is the apex decision-making body during CIRP for financial creditors.
Directors’ powers suspended, RP acts as liaison between CoC and management.
All major operational and financial decisions require CoC approval.
Voting shares determine outcomes, ensuring creditor interests dominate.
Judicial trend: Courts uphold CoC decisions if statutory procedure and voting thresholds are complied with.
Corporate interactions: CoC coordinates with RP, directors, operational creditors, employees, and regulators to ensure orderly insolvency resolution.
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