Understanding the Committee of Creditors in CIRP
The Insolvency and Bankruptcy Code (IBC), 2016, introduced a streamlined process for resolving corporate insolvency. A cornerstone of this process is the Committee of Creditors (CoC). This committee plays a pivotal role in decision-making throughout the Corporate Insolvency Resolution Process (CIRP), significantly influencing the outcome for the corporate debtor and its stakeholders.
Formation of the Committee of Creditors
Upon the initiation of CIRP by the Adjudicating Authority (AA), the Insolvency Professional (IP) is appointed as the Interim Resolution Professional (IRP). The IRP's immediate task is to collate all claims received from creditors. Based on these verified claims, the IRP constitutes the Committee of Creditors.
Composition and Voting Rights
The CoC is primarily composed of financial creditors. However, operational creditors are also included, albeit with a different weightage. The voting rights are allocated based on the financial value of admitted claims, ensuring that those with the most significant financial exposure have a more substantial influence on the committee's decisions.
| Creditor Type | Role in CoC | Voting Share Basis |
|---|---|---|
| Financial Creditor | Primary member | Quantum of financial debt |
| Operational Creditor | Member (with limitations) | Quantum of operational debt (as a class) |
Key Functions and Powers of the CoC
The CoC is the supreme decision-making body during CIRP. Its primary responsibilities include approving or rejecting resolution plans, appointing or replacing the Resolution Professional, and deciding on the liquidation of the corporate debtor if no viable resolution plan is found.
The '66% voting threshold' is a critical aspect, ensuring that significant consensus is required for major decisions, thereby protecting the interests of all stakeholders.
Role of the Resolution Professional (RP)
The Resolution Professional acts as the facilitator and administrator of the CIRP. While the CoC makes the ultimate decisions, the RP manages the day-to-day operations, convenes meetings, provides information to the CoC, and ensures compliance with the IBC provisions. The RP is accountable to the CoC.
To make key decisions regarding the resolution or liquidation of the corporate debtor, including approving resolution plans.
Challenges and Considerations
The functioning of the CoC can be complex, involving diverse creditor interests, potential conflicts, and the need for timely decision-making. Ensuring transparency, fairness, and adherence to the IBC's principles is paramount for the successful resolution of corporate insolvency.
Learning Resources
The official and most up-to-date version of the Insolvency and Bankruptcy Code, 2016, providing the legal framework for CIRP and the constitution of the CoC.
Detailed regulations governing the Corporate Insolvency Resolution Process, including specific provisions on the formation and functioning of the Committee of Creditors.
An insightful blog post explaining the composition, powers, and significance of the Committee of Creditors in the Indian insolvency framework.
A legal blog that delves into the critical role and decision-making powers of the CoC, offering practical insights into its functioning.
A comprehensive guide to the CIRP process, which includes a section detailing the formation and role of the Committee of Creditors.
While not a direct Wikipedia page, IndianKanoon provides access to numerous court judgments related to the IBC, including those that interpret the powers and composition of the CoC.
A detailed overview of the IBC, 2016, from PRS Legislative Research, which explains the foundational aspects of CIRP and the CoC's place within it.
An introductory video explaining the basics of the IBC, including the role of various stakeholders like the CoC.
A critical analysis of the Committee of Creditors, discussing its powers, responsibilities, and the challenges it faces in practice.
The official website of the National Company Law Tribunal (NCLT), where one can find orders and judgments related to CIRP cases, offering real-world examples of CoC functioning.