What role does the committee of creditors play in the insolvency resolution process?

Question

My bank is a financial creditor of a company under CIRP and has been included in the committee of creditors. What powers and voting rights does the committee have? I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

What role does the committee of creditors play in the insolvency resolution process? is governed in India primarily by Insolvency and Bankruptcy Code 2016, Section 21, Insolvency and Bankruptcy Code 2016, Section 22 and Insolvency and Bankruptcy Code 2016, Section 30. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 21 requires the interim resolution professional to constitute a committee of creditors comprising all financial creditors of the corporate debtor, with voting share generally proportionate to the amount of debt owed to each.

Section 22 empowers the committee of creditors to confirm the appointment of the interim resolution professional as resolution professional or replace them with a majority vote of not less than sixty-six percent.

The committee reviews resolution plans submitted by prospective resolution applicants under Section 30 and approves a plan by a vote of not less than sixty-six percent of voting share before it is placed before the NCLT for sanction.

The Supreme Court has repeatedly held that the commercial wisdom of the committee of creditors in approving or rejecting a resolution plan is largely non-justiciable and courts will not second-guess the commercial decision except on limited procedural grounds.

Operational creditors, while not members of the committee, are entitled to a minimum payout under the resolution plan that is not less than what they would receive in liquidation.

What to do next: 1) Verify your admitted claim amount to ensure correct voting share in the committee of creditors; 2) Participate actively in committee meetings and scrutinise resolution plans presented for approval; 3) Vote in accordance with your institution's internal credit and risk assessment of the resolution plan; 4) Consult insolvency counsel before objecting to a plan already approved by the requisite majority.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Insolvency and Bankruptcy Code 2016, Section 21 carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.