Insolvency & BankruptcyRole and Responsibilities of the Committee of Creditors

Introduction

In India’s insolvency ecosystem, the Committee of Creditors (CoC) occupies a pivotal position within the Corporate Insolvency Resolution Process (CIRP) framework established by the Insolvency and Bankruptcy Code, 2016 (IBC). After the National Company Law Tribunal (NCLT) admits a company into the CIRP, the interim resolution professional collects and validates claims and forms the CoC within thirty (30) days.

From that point, the CoC, exercising its statutory powers, becomes the company’s commercial brain trust, guiding every critical decision—from the most mundane to the decisive vote that determines whether a company is rescued or liquidated.

The CoC is structured to align incentives, as voting power is based on debt exposure. Those with the most exposure have the loudest voice, yet minority creditors are protected because they are entitled to disclosures and meeting notices, as well as statutory timelines that restrict majoritarian abuse.

Through nine years of amendments, regulations, and case law, lawmakers and the courts have persistently refined the CoC’s role, understanding that creditor democracy, weighted by financial exposure, must be balanced with accountability and speed. This blog explores the committee’s importance, composition, major powers, and conduct as shaped by recent legislative and judicial changes.

Importance of the CoC in the CIRP

The CoC is important for four interconnected reasons.

• First, it restores hierarchical creditor authority, as it is the lenders, not judges, who decide whether a distressed debtor deserves a commercial reset. That liberal economic space is the IBC’s core promise and a significant attraction for global distressed-asset investors.
• Second, the committee’s voting structure provides the necessary predictability and pace. Value that would otherwise be lost during litigation is preserved under tight deadlines, with a super-majority of sixty-six percent (66%) for critical decisions striking a balance between paralysis and reckless haste.
• Third, a proactive committee ensures fairness across the creditor hierarchy. While operational creditors, workmen, and homebuyers do not have voting rights, they depend on the CoC’s accountability to safeguard the remaining value and ensure its fair allocation under a sanctioned plan.
• Finally, the committee’s work directly shapes market confidence in the entire insolvency framework. The incentive for investors to bid on distressed assets is diminished without a CoC that proves it can professionally evaluate strategic resolution plans, obtain necessary approvals, and adhere to the final decision.

Whenever process lapses—such as a failure to verify claims or seek antitrust approval—have forced the Supreme Court to unwind resolutions, the cost in lost time and eroded asset value has underscored just how pivotal a vigilant CoC is to the system.

Composition and Formation

Only financial creditors, including banks, bondholders, or authorized representatives of homebuyers, comprise the CoC. Operational creditors may attend meetings only when their aggregate dues are at least ten percent (10%) of the total debt, but they do not have voting rights.

Recent changes have invited key public authorities, like municipal or land departments, to observe insolvent real estate projects, broadening meaningful participation. The resolution professional must distribute the agenda to all participants at least twenty-four hours before each meeting. He or she is obligated to schedule a meeting every thirty days unless the committee decides to meet less often.

Voting is now conducted electronically, with the committee determining the duration of the e-voting window, which must be at least twenty-four hours and may extend up to seven days in one-day increments. These steps, while straightforward, are essential for engaging lenders across geographical boundaries.

Role and Responsibilities of the CoC

Statutorily vested with significant authority, the CoC’s mandate unfolds through the following roles and responsibilities:

Constitute and Curate the Insolvency Team

• Confirm the interim resolution professional (IRP) or, with a 66% vote, replace the IRP under Section 27 of the Act.
• Fix the remuneration and reimbursement structure for the IRP/RP and every other professional engaged during the CIRP.

Control the Debtor’s Purse Strings

• Sanction interim finance, set monthly cash-burn limits, and approve the creation of liens or security interests.
• Grant or refuse all “prior-approval” actions listed in Section 28 (e.g., altering share capital, shifting bank accounts, related-party contracts, management changes, auditor swaps).

Design the Bidding Framework

• Review the Information Memorandum that discloses the company’s financials to bidders.
• Clear the Evaluation Matrix that scores bids and vet any mid-process tweak to that matrix.
• Appoint valuers, forensic auditors, and industry experts to strengthen the data backbone for decision-making.

Assess and Vote on Resolution Plans

• Test each plan for feasibility, viability, Section 29A eligibility, ESG risks, litigation contingencies, and fairness of distribution across creditor classes.
• Pass or reject a plan with a 66% super-majority and record a detailed rationale in the minutes for transparency.

Manage Statutory Timelines

• Instruct the RP on seeking a 90-day extension (or a rare extension beyond 330 days) from the NCLT.
• Keep a running watch on procedural clocks, ensuring no step—claim verification, valuation, plan submission—misses its deadline.

Opt for Liquidation or Withdrawal

• Vote (66%) for liquidation when no viable plan surfaces or when liquidation offers a higher net-present value.
• Exercise the 90% “Section 12A” power to withdraw the case entirely and restore the debtor to its pre-insolvency status if a late bilateral settlement makes more sense.

Oversee Post-Approval Execution

• Decide whether to create a Monitoring Committee that files quarterly progress reports on plan implementation.
• Recall the successful resolution applicant for clarifications, covenant resets, or milestone audits when slippage appears.

Initiate and Fund Litigation & Claw-Backs

• Commission avoidance-action suits (for preferential, undervalued, fraudulent, or extortionate transactions).
• Allocate budgets for those suits and determine how any claw-back recoveries should be distributed.

Secure Regulatory Clearances

• Obtain or condition approval on Competition Commission of India (CCI) clearance when a plan triggers merger-control thresholds, as per the Supreme Court’s 2025 Independent Sugar ruling.
• Liaise with sectoral regulators—RBI, SEBI, electricity regulators, mining authorities—to tie up statutory loose ends before the final vote.

Represent and Protect Special Classes of Creditors

• Approve the appointment and costs of Authorized Representatives for large classes, such as homebuyers or debenture-holders.
• Invite government or municipal bodies (e.g., land authorities in real estate CIRPs) to observe meetings so that public-law constraints surface early.

Steer End-Game Options During Liquidation

• Before liquidation commences, decide whether to attempt a compromise/arrangement under Section 230 of the Companies Act or pursue a going-concern sale.
• After the liquidation order, the CoC is replaced by a Stakeholders’ Consultation Committee (SCC); the ongoing sale strategy is then guided by the SCC, not the CoC (Liquidation Regulation 31-A).

Legislative and Judicial Evolution

The IBC is a living legislation, amended almost every year to address practical gaps. A 2024 amendment, reflecting legislative attempts to advance proceedings, lowered the voting threshold required to approve a resolution plan from seventy-five to sixty-six percent.

In the same year, the IBBI formalized rules for e-voting and monthly CoC meetings—a direct acknowledgment of the work-from-home structure adopted during the pandemic and the need for predictability. In February 2025, regulations were further tailored for real estate, empowering committees to hand over constructed units to homebuyers well before plans were sanctioned.

Courts, on the other hand, have tested the limits of deference and intervention. While cases like K. Sashidhar and Essar Steel affirmed that a committee’s commercial wisdom is largely non-justiciable, more recent judgments have leaned the other way, arguing that procedural integrity is non-negotiable. In May 2025, the Supreme Court annulled the resolution of Bhushan Power because the CIRP had exceeded the 330-day limit, reaffirming that creditor autonomy cannot override statutory timelines.

AMLEGALS Remarks

The CoC is called the economic conscience of Indian insolvency. The pattern is striking: a collaborative creditor system optimizes value, whereas competitive environments or information silos halt progress and breed litigation. The most recent revisions to the regulations—remote meetings, flexible voting periods, authorized representatives for scattered classes of creditors, and compulsory observing committees—mark a tailored, gap-focused approach.

However, there is still a long way to go. The protection of minority creditors still relies primarily on information disclosure instead of substantive veto powers. The interaction of the Insolvency Code, sectoral regulators, and the Competition Act would be better served by standing frameworks instead of ad-hoc judicial patchwork.

Most importantly, banks need to actively train their personnel on deal valuation, forensic flags, and ESG risks, so choices made under tight timelines are better informed. A thorough and transparent CoC is more than a procedural formality; it is the pivot around which India’s distressed-asset market rotates. When committees fulfill their functions diligently and expediently, distressed companies are provided with real second chances, investors regain trust, and the credit market becomes more disciplined.

— Team AMLEGALS

Please reach out to us at rohit.lalwani@amlegals.com in case of any query.