IBC

FUNCTIONS OF COMMITTEE OF CREDITORS UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016

Although Interim Resolution Professional or the Resolution Professional, as the case may be, conducts CIRP and manages the day-to-day affairs, the ultimate control and supervision of CIRP lies with Committee of Creditors. It will not be an exaggeration to say that the fate of Corporate Debtor whether it will be revived or be liquidated lies in the hands of Committee of Creditors.

All critical decisions impacting Corporate Insolvency Resolution Process have to be approved by Committee of Creditors. For actions taken under Section 28 prior approval of the Committee of Creditors with sixty six percent of voting share is required. For withdrawal of an application admitted under Section 7, 9 or 10, approval of Committee of Creditors with ninety percent of voting share is required. For replacement of Resolution Professional or approval of Resolution Plan, approval of Committee of Creditors with sixty six percent of voting share is required.

In most of the cases, Committee of Creditors comprises of only Financial Creditors but it has powers to take decision on substantive and contractual rights affecting Operational Creditors, Decree Holders, Secured Creditors and Other Creditors.  Contractual and substantive rights of such creditors can be curtailed or extinguished without their consent by the Committee of Creditors, as such there is inherent element of inequity in functioning of the Committee of Creditors.

COMMERCIAL WISDOM OF COMMITTEE OF CREDITORS

Decision taken by Committee of Creditors in relation to revival or liquidation of a Corporate Debtor is essentially a commercial decision.  The Bankruptcy Law Reform Committee was of the opinion that appropriate disposition of a defaulting debtor is a business decision and only creditors should make it.  Relevant para of the Report is as under:

When a firm (referred to as the Corporate Debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned.

The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision: a creditors committee, where all Financial Creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the government (legislature, executive or judiciary) into this question. This has been strictly avoided by the Committee. The appropriate disposition of a defaulting firm is a business decision, and only the creditors should make it.

The Supreme Court has observed in catena of judgments that commercial wisdom of Committee of Creditors will take primacy in respect of approval of Resolution Plan, withdrawal of application and various other aspects. NCLT and NCLAT cannot sit in appeal over commercial wisdom of the Committee of Creditors.   The Supreme Court in K Shashidhar1 has held that commercial wisdom of Committee of Creditors is non-justiciable.

33. As aforesaid, upon receipt of a rejected Resolution Plan the Adjudicating Authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I & B Code. The legislature has not endowed the Adjudicating Authority (NCLT) with the jurisdiction or authority to analyase or evaluate the commercial decisions of the CoC much less to enquire into the justness of the rejection of the Resolution Plan by the dissenting Financial Creditors. From the legislative history and the backgrounds in which the I & B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the Corporate Debtor could indefinitely continue to enjoy the protection given under Section 22 of Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides the commercial wisdom   of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within timelines prescribed by the I & B Code. There is an intrinsic assumption that Financial Creditors are fully informed about the viability of the Corporate Debtor and feasibility of the proposed Resolution Plan. They act on the basis of thorough examination of the proposed Resolution Plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual Financial Creditors or their collective decision before the Adjudicating Authority. That is made non-justiciable.

Over emphasis on commercial wisdom of Committee of Creditors has resulted in resolution of various Corporate Debtors with huge haircuts to Financial Creditors, Operational Creditors and Other Creditors. Parliamentary Standing Committee on Finance (2020-21) in its 32nd Report has recommended a professional code of conduct for members of Committee of Creditors which can define and circumscribe their decisions.

CONSTITUTION OF COC

Section 21 of the Code provides for constitution of Committee of Creditors and representation of Financial Creditors in Committee of Creditors.

Constitution of CoC

Section 21 (1) provides for constitution a Committee of Creditors by Interim Resolution Professional after collation of all claims received against the Corporate Debtor and determination of financial position of Corporate Debtor. According to CIRP Regulation 17 (1) Interim Resolution Professional has to file a report certifying constitution of Committee of Creditors to the Adjudicating Authority within two days of the verification of claims received under CIRP Regulation 12 (1).   According to CIRP Regulation 17 (2) Interim Resolution Professional has to hold the first meeting of the Committee of Creditors withing seven days of filing of the report. 

CoC to consist of Financial Creditors

Section 21 (2) provides that the Committee of Creditors shall comprise of Financial Creditors of Corporate Debtor only.

As per first proviso of Section 21 (2), a Related Party to Financial Creditor or authorised representative of Financial Creditor does not have right to represent, participate or vote in a meeting of the Committee of Creditors.

Second proviso of Section 21 (2) has been introduced vide Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, whereby ineligibility caused to a related Financial Creditor has been done away with if such Financial Creditor is a Related Party only on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares on completion of such transactions. This amendment was necessitated as the Insolvency Law Committee in its 1st Report has observed that various debt restructuring schemes had been introduced by the RBI in the past such as the strategic debt restructuring scheme and scheme for sustainable structuring of stressed assets which enabled Financial Creditors such as banks to convert part of their debt into equity.  In many cases, because of such coversion from debt to equity, Financial Creditors become related parties and becomes ineligible to participate in Committee of Creditors.

Section 21(3) provides that if the Corporate Debtor owes Financial Debts to two or more Financial Creditors as part of a consortium or agreement, each such Financial Creditor will be part of the Committee of Creditors and their voting share be determined on the basis of Financial Debts owed to them.

Section 21(4) provides that if a person is a Financial Creditor as well as an Operational Creditor, such person will be Financial Creditor to the extent of the Financial Debt owed to the Corporate Debtor and included in the Committee of Creditors. Voting right of such creditor will be proportionate to the financial part of the debt.  Such creditor will be considered Operational Creditor to the extent it owes Operational Debt to the Corporate Debtor.

Section 21 (5) provides that if an Operational Creditor has assigned or legally transferred any Operational Debt to a Financial Creditor, the assignee or transferee will be considered as an Operational Creditor to the extent of such assignment or legal transfer.

Representation through Authorised Representative

Section 21(6) provides that if various Financial Creditors have extended loan facility under consortium arrangement or syndicated facility and such facility provides for a single trustee or agent to act for all Financial Creditors, each Financial Creditor can authorise the trustee or agent on his behalf in the Committee of Creditors to the extent of his voting share. Each Financial Creditor can also represent himself in Committee of Creditors to the extent of his voting share. Each Financial Creditor can also appoint Insolvency Professional at his own cost to represent himself in Committee of Creditors to the extent of his voting share. Each Financial Creditor can exercise his right to vote to the extent of his voting share with one or more Financial Creditors jointly or severally.

 Section 21 (6A) and (6B) have been introduced vide Insolvency and Bankruptcy Board (Amendment) Act, 2018. Section 6A introduces concept of authorised representative in the Committee of Creditors in cases of Financial Creditors like deposit holders, bond holders or real estate allottees (home buyers), who can be in large numbers. If such large number of Financial Creditors participate in Committee of Creditors, the Committee of Creditors will not be able to function effectively and efficiently.

Section 21 (6A) (a) provides that where the Financial Debt is in form of securities or deposits and terms of the Financial Debt provides for the appointment of trustee or agent to act as authorised representative for all the Financial Creditors, such trustee or agent will act on behalf of such Financial Creditors and attend the meeting of Committee of Creditors and vote to the extent of voting share. 

Section 21 (6A) (b) provides that where Financial Debt is owed to a class of creditors, the Interim Resolution Professional has to make an application to the Adjudicating Authority along with the list of all the Financial Creditors containing the name of an Insolvency Professional who has to be appointed as their authorised representative. Such Insolvency Professional has to be appointed by the Adjudicating Authority prior to the first meeting of the Committee of Creditors. Such authorised representative can attend and vote to the extent of their voting share.

Section 21 (6A) (c) where the Financial Debt is owed by a Financial Creditor, who is represented by a guardian, executor or administrator, such person has to act as authorised representative on behalf of such Financial Creditor. Such authorised representative has to attend meeting of Committee of Creditors and vote to the extent of his voting share.

Section 21 (6B) provides details of remuneration to be paid to authorised representative. In cases of   deposit holders, bond holders and Financial Creditors represented by a guardian, executor or administrator, the remuneration has to be paid as terms of Financial Debt or relevant documentation. In cases of creditor in a class, the remuneration has to be paid as specified by  IBBI.

Decision Making in CoC

Section 21 (8) provides that all decisions of Committee of Creditors shall be taken by at least fifty one percent of voting share of the Financial Creditors.

Power of CoC to seek Financial Information

According to Section 21 (9) and (10), the Committee of Creditors has right to require the Resolution Professional to furnish any financial information in relation to the Corporate Debtor at any time during Corporate Insolvency Resolution Process.  The Resolution Professional has to make available all such financial information to the Committee of Creditors within seven days of such requisition.

COMMITTEE WITH ONLY OPERATOINAL CREDITORS

According to Section 21 (2) the Committee of Creditors comprises of only Financial Creditors. There can be cases, where there is no Financial Creditor of a Corporate Debtor.   CIRP Regulation 16 provides that where the Corporate Debtor has no Financial Debt or where all the Financial Creditors are related parties of the Corporate Debtor, the Committee of Creditors has to consist of eighteen largest Operational Creditors by value.  If the number of Operational Creditors is less than eighteen, such Operational Creditors will be included in Committee of Creditors. One representative will be elected by all workmen excluding workmen, if any, included in largest eighteen Operational Creditors and one representative has to be elected by employees excluding employees, if any, included in largest eighteen Operational Creditors.

A member of Committee of Creditors formed under CIRP Regulation 16 has voting rights in proportion of the debt due to such creditor or debt represented by such representative as the case may be to the total debt. Total debt in this case will be sum of debt owed to eighteen largest Operational Creditors, workmen and employees.

A Committee of Creditors consisting of Operational Creditors and its members have same rights, powers, duties, and obligation as a Committee of Creditors comprising Financial Creditors and its members.

COMMITTEE WITH ONLY CREDITORS IN A CLASS

Where a Corporate Debtor has only creditors in a class and no other Financial Creditor, Committee of Creditors has to comprise of only the authorised representative of creditors in a class.

REPRESENTATION OF CREDITORS IN A CLASS IN COC

CIRP Regulation 2 (aa) defines “class of creditors” as a class with at least ten Financial Creditors under Section 21 (6A) (b) and the expression “creditors in a class” will be construed accordingly.

Creditors in a class are members of Committee of Creditors.   Creditors in a class can be in large numbers and if all of them participate in meetings of Committee of Creditors, proper functioning of Committee of Creditors will be adversely affected. Hence concept of authorised representative of creditors in a class has been introduced in Section 21 (6A) (b) through which the creditors in a class are represented in the Committee of Creditors.

Detail procedure for appointment of authorised representative of creditors in a class is given under CIRP Regulation 4A.  On an examination of books of accounts and other relevant records of the Corporate Debtor, the Interim Resolution Professional has to ascertain if there exists any class(s) of creditors. If there exists any class(s) of creditors of Corporate Debtor, the Interim Resolution Professional has to identify three Insolvency Professionals, who are eligible to be Resolution Professional, for representation of such creditors in a class in Committee of Creditors.  Such Insolvency Professional should not be relative or related parties of Interim Resolution Professional and should be residing in a state where largest number of creditors belong to.

The Interim Resolution Professional has to obtain the consent of each Insolvency Professional   identified to act as authorised representative of creditors in a class in Form AB of CIRP Regulations.

Public announcement has to offer choice of three Insolvency Professionals identified under Regulation 4A to act as authorised representative of creditors in each class. While submitting   claims, a creditor in a class has to indicate its choice of an Insolvency Professional from amongst the three choices provided by the Interim Resolution Professional in the public announcement to act as its authorised representative.

The Interim Resolution Professional has to select the Insolvency Professional, who is the choice of the highest number of Financial Creditors in the class in Form CA received under Regulation 12 (1) from creditors, who have filed their claim within date mentioned in the public announcement, to act as the authorised representative of the creditors of the respective class.  The choice for an Insolvency Professional to act as authorised representative in Form CA received under regulation 12 (2), from creditors who filed their claim beyond date mentioned in the public announcement, cannot be considered.

The Interim Resolution Professional has to apply to the Adjudicating Authority for appointment of the authorised representative within two days of verification of claims received.  Any delay in appointment of the authorised representative for any class of creditors will not affect the validity of any decision taken by the committee.

The Interim Resolution Professional has to provide List of Creditors in each class to the respective authorised representative appointed by the Adjudicating Authority. The Interim Resolution Professional has to provide an updated List of Creditors in each class to the respective authorised representative as and when the list is updated.  The authorised representative will have no role in receipt or verification of claims of creditors of the class he represents.

The Interim Resolution Professional has to provide electronic means of communication between the authorised representative and creditors in a class.

The voting share of a creditors in a class has to be in proportion to the Financial Debt which includes an interest at the rate of eight percent per annum unless a different rate has been agreed to between the parties.

The authorised representative of creditors in a class has to be entitled to receive fee for every meeting of the Committee of Creditors attended by him.

The authorised representative has to circulate the agenda to creditors in a class, and may seek their preliminary views on any item in the agenda to enable him to effectively participate in the meeting of the committee.  The creditors will have time window of at least twelve hours to submit their preliminary views, and the said window opens at least twenty-four hours after the authorised representative seeks preliminary views. Such preliminary view will not be considered as voting instructions by the creditors.

RIGHTS AND DUTIES OF AUTHORISED REPRESENTATIVE OF FINANCIAL CREDITORS

Section 25A provides details of rights and duties of authorised representative of various categories.

The authorised representative appointed under Section 21 (6) or 21 (6A) or Section 24(5) has right to participate and vote in meetings of the Committee of Creditors on behalf of Financial Creditors.  Such authorised representative has to vote in accordance with prior voting instruction of Financial Creditor, whom he represents, obtained through physical or electronic means.

Such authorised representative is dutybound to circulate the agenda and minutes of Committee of Creditors to the Financial Creditor he represents. Authorised representative cannot act against the interest of the Financial Creditors he represents and has to always act in accordance with their prior instruction. If an authorised representative represents several Financial Creditors, he has to vote in accordance with instruction received from each Financial Creditor to the extent of his voting share. If the authorised representative has not been given any prior instruction from a Financial Creditor, he has to abstain from voting.

But in case of authorised representative of security and deposit holder under Section 21 (6A) (a) and class of creditors under Section 21 (6A) (b), such authorised representative has to vote on behalf of all the Financial Creditors he represents in accordance with the decision taken by a vote of more than fifty percent of voting shares of the Financial Creditors he represents, who have casted their vote.  But in case of application for withdrawal of insolvency proceeding under 12A, the authorised representative has to vote in accordance with instruction received from each creditor in a class.

The authorised representative has also to file any instruction received through physical or electronic means with the Interim Resolution Professional or Resolution Professional as the case may be so that appropriate voting instruction of the Financial Creditor, he represents is correctly recorded.

APPROVAL OF COMMITTEE OF CREDITORS FOR CERTAIN ACTIONS

Under Section 28, for taking certain actions, prior permission of Committee of Creditors is compulsory. Such actions are to:

  • Raise interim finance in excess of amount as may be decided by the Committee of Creditors in their meeting
  • Create any security interest over the assets of the Corporate Debtor
  • Change the capital structure of the Corporate Debtor, including by way of issuance of additional securities, creating a new class of securities or buying back or redemption of issued securities in case the Corporate Debtor is a company
  • record any change in the ownership interest of the Corporate Debtor
  • give instructions to financial institutions maintaining accounts of the Corporate Debtor for a debit transaction from any such accounts in excess of the amount as may be decided by the Committee of Creditors in their meeting
  • undertake any Related Party Transaction
  • amend any constitutional document of the Corporate Debtor
  • delegate its authority to any other person
  • dispose of or permit the disposal of shares of any shareholder of the Corporate Debtor or their nominees to the third parties
  • make any change in the management of the Corporate Debtor or its subsidiary
  • transfer rights or Financial Debts or Operational Debts under material contracts otherwise than in the ordinary course of business
  • make changes in the appointment or terms of contract of such personnel as specified by the Committee of Creditors
  • make changes in the appointment or terms of contract of statutory auditors or internal auditors of the Corporate Debtor

For taking any of the aforesaid actions, the Resolution Professional has to convene a meeting of Committee of Creditors.  Approval of vote of sixty six percent of members of Committee of Creditors are required for approval of any such action.  If any of aforesaid action is taken by the Resolution Professional without approval of Committee of Creditors, such action will be void.  If any such action is taken by Resolution Professional, such action may be reported to IBBI.

REPLACEMENT OF RESOLUTION PROFESSIONAL

Section 27 has provisions for replacement of Resolution Professional.

If at any time during Corporate Insolvency Resolution Process, the Committee of Creditors is of opinion that Resolution Professional is required to be replaced, the Committee of Creditors can replace the Resolution Professional by a vote of sixty six percent voting shares at a meeting of Committee of Creditors. The proposed Resolution Professional must have submitted its written consent to act as Resolution Professional.  The Committee of Creditors   has to forward the name of the Insolvency Professional to the Adjudicating Authority for appointment as new Resolution Professional. The Adjudicating Authority has to appoint such Insolvency Professional as Resolution Professional after confirmation from IBBI if no disciplinary proceedings are pending against such Insolvency Professional. 

NCLAT has held in Ram Dev International1 that no reasons need to be given by Committee of Creditors for replacement of Resolution Professional.

MEETING OF COMMITTEE OF CREDITORS

Section 24 of the Code provides for procedure of meeting of Committee of Creditors which is as follows:

24. Meeting of committee of creditors. –

 (1) The members of the committee of creditors may meet in person or by such electronic means as may be specified.

 (2) All meetings of the committee of creditors shall be conducted by the resolution professional.

(3) The resolution professional shall give notice of each meeting of the committee of creditors to-

 (a) members of committee of creditors, including the authorised representatives referred to in sub-sections (6) and (6A) of section 21 and sub-section (5);

(b) members of the suspended Board of Directors or the partners of the corporate persons, as the case may be;

(c) Operational Creditors or their representatives if the amount of their aggregate dues is not less than ten per cent. of the debt.

 (4) The directors, partners and one representative of operational creditors, as referred to in sub-section (3), may attend the meetings of committee of creditors, but shall not have any right to vote in such meetings:

 Provided that the absence of any such direct or, partner or representative of operational creditors, as the case may be, shall not invalidate proceedings of such meeting.

(5) Subject to sub-sections (6), (6A) and (6B) of section 21, any creditor] who is a member of the committee of creditors may appoint an insolvency professional other than the resolution professional to represent such creditor in a meeting of the committee of creditors:

 Provided that the fees payable to such insolvency professional representing any individual creditor will be borne by such creditor.

 (6) Each creditor shall vote in accordance with the voting share assigned to him based on the financial debts owed to such creditor.

(7) The resolution professional shall determine the voting share to be assigned to each creditor in the manner specified by the Board.

(8) The meetings of the committee of creditors shall be conducted in such manner as may be specified.

Section 24(1) provides that the members of the Committee of Creditors may meet in person or by such electronic means as may be specified by IBBI. According to CIRP Regulation 18, Resolution Professional may convene a meeting of the Committee of Creditors as and when he considers it necessary. Resolution Professional has to convene a meeting if a request to that effect is made by members of the Committee of Creditors representing thirty three percent of the voting rights. Meeting (s) of the Committee of Creditors may be convened till the Resolution Plan is approved under Section 31 (1) or order for liquidation is passed under section 33 and decide on matters which do not affect the Resolution Plan submitted before the Adjudicating Authority

According to Section 24(2) all meetings of Committee of Creditors have to be conducted by Resolution Professional.

Under Section 24 (3) Resolution Professional has to give notice of each meeting to members of Committee of Creditors including the authorised representatives referred to in Section 21 (6), Section 21 (6A) and Section 24 (5). Notice has also to be given also to members of the suspended board of directors or the partners of the Corporate Persons as the case may be. Notice has also to be given to Operational Creditors or their representatives if the amount of their aggregate dues is not less than ten percent of the debt. According to CIRP Regulation 19(1), a meeting of Committee of Creditors has to be called by giving not less than five days notice in writing to every participant at the address it has provided to Interim Resolution Professional or Resolution Professional as the case may be and such notice may be sent by hand delivery or by post but in any event be served on every participant by electronic means. As per CIRP Regulation 19 (2), the Committee of Creditors may reduce the notice period to such other period of not less than twenty-four hours, but if Committee of Creditors has authorised representative, such notice period cannot be less than forty-eight hours.

According to Section 24 (4) directors, partners and one representative of Operational Creditors may attend the meetings of Committee of Creditors, but do not have any right to vote in such meetings. The absence of any such director or partner or representative of Operational Creditors, as the case may be, does not invalidate proceedings of such meeting.

Section 24(5) provides that any creditor who is a member of the Committee of Creditors may appoint an Insolvency Professional other than the Resolution Professional to represent such creditor in a meeting of the Committee of Creditors. Fees payable to such Insolvency Professional representing any individual creditor will be borne by such creditor.

According to Section 24 (6) each creditor has to vote in accordance with the voting share assigned to him based on the Financial Debts owed to such creditor.

Section 24(7) provides that the Resolution Professional has to determine the voting share to be assigned to each creditor in the manner specified by IBBI.

Section 24 (8) provides that the meetings of Committee of Creditors have to be conducted in such manner as may be specified by IBBI.

SERVICE OF NOTICE BY ELECTRONIC MEANS

CIRP Regulation 20 provides procedure for sending notices by electronic means to participants.

A notice by electronic means has to be sent to the participants through e-mail as a text or as an attachment to e-mail or as a notification providing electronic link or uniform resource locator (URL) for accessing such notice.  The subject matter of the e-mail has to state the name of the Corporate Debtor, the place, time and date on which the meeting is scheduled.

If notice is sent in form of a non-editable attachment to an e-mail, such attachment will be in the portable document format (PDF) or in a non-editable format together with a ‘link or instructions’ for recipient for downloading relevant version of software.

When notice or notifications of availability of notice are sent by an e-mail, the Resolution Professional has to ensure that it uses a system which produces confirmation of the total number of recipients’ e-mail and a record of each recipient to whom the notice has been sent. Copy of such record and any notices of any failed transaction and subsequent re-sending has to be retained as “proof of sending”.

The obligation of the Resolution Professional is satisfied when he transmits the e-mail and he cannot be held responsible for a failure in transmission beyond his control.

The notice made available on the electronic link or uniform resource locator (URL) has to be readable and the recipient should be able to obtain and retain copies. The Resolution Professional has to   give the complete uniform resource locator or address of the website and full details of how to access the document or information.

If a participant other than a member of the Committee of Creditors fails to provide or update the relevant e-mail address to the Resolution Professional, non-receipt of such notice by such participant of any meeting will not invalidate the decisions taken at such meeting.

CONTENTS OF NOTICE

The notice of the meeting of Committee of Creditors has to inform the participants of the venue, the time and date of the meeting and of the option available to them to participate through video conferencing or other audio and visual means, and also to provide all the necessary information to enable participation through video conferencing or other audio and visual means.

The notice has to provide that a participant can attend and vote in the meeting either in person or through an authorised representative.  Such participant has to inform Resolution Professional in advance of the meeting of the identity of the authorised representative, who will attend and vote at the meeting on its behalf.

The notice of meeting has to contain a list of matters to be discussed at the meeting, a list of the issues to be voted upon at the meeting, copies of all documents relevant to the matters to be discussed.

The notice of meeting has to state the process and manner for voting by electronic means and the time schedule, including the time period during which the votes may be cast.  The notice has also to provide the login ID and the details of a facility for generating password and for keeping security and casting of vote in a secured manner. The notice has also to provide contact details of person who will address the queries connected with electronic voting.

QUORAM AT THE MEETING 

A meeting of the Committee of Creditors is quorate if members representing at least thirty three percent of the voting rights are present either in person or by video conferencing or other audio and visual means. Committee of Creditors may modify the percentage of voting rights required for quorum in respect of any future meeting of the Committee of Creditors.

Where a meeting of Committee of Creditors could not be held for want of quorum, unless the committee has previously decided otherwise, the meeting will automatically stand adjourned at the same time and place on the next day.  In such cases, the meeting will be quorate with the members of the committee attending the meeting.

PARTICIPATION THROUGH VIDEO CONFERENCING

The notice convening the meeting of the Committee of Creditors has to provide the participants an option to attend the meeting through video conferencing or other audio and visual means.  The Resolution Professional has to make necessary arrangements to ensure uninterrupted and clear video or audio and visual connection. 

The Resolution Professional has to take due and reasonable care

  • To safeguard the integrity of the meeting by ensuring sufficient security and identification procedures
  • To ensure availability of proper video conferencing or audio and visual equipment of facilities for providing transmission of the communication for effective participation of the participants at the meeting
  • To record proceedings and prepare the minutes of the meeting
  • To store for safekeeping and marking the physical recording (s) or other electronic recording mechanism as part of the records of the Corporate Debtor
  • To ensure that no person other than the intended participants attends or has access to the proceedings of the meeting through video conferencing or other audio and visual means
  • To ensure that participants attending the meeting through audio and visual means are able to hear and see, if applicable, the other participants clearly during the course of the meeting. The persons who are differently abled may make request to the Resolution Professional to allow a person to accompany him at the meeting.

CONDUCT OF MEETING                                             

CIRP Regulation 24 provides that the Resolution Professional shall act as the chairperson of the meeting of the Committee of Creditors.  At the commencement of the meeting, the Resolution Professional has to take a roll call.  Every participant attending through video conferencing or other audio or visual means has to state, for the record, his name, his location, capacity in which he is attending the Committee of Creditors. Such participant has also to confirm whether he has received the agenda and all the relevant material for meeting. Such participant has also to confirm that none other than him is attending or has access to the proceedings of the meeting at the location of that person.

After the roll call, the Resolution Professional has to inform the participants of the names of all persons who are present for the meeting and confirm if the required quorum is complete. The Resolution Professional has to ensure that the required quorum is present through the meeting.  From the commencement of the meeting till its conclusion, no person other than the participants and any other person whose presence is required by the Resolution Professional has to be allowed access to the place where meeting is held or to the video conferencing or other audio and visual facility without the permission of the Resolution Professional.

The Resolution Professional has to ensure that minutes are made in relation to each meeting of the Committee of Creditors and such minutes has to disclose the particulars of the participants who attended the meeting in person through video conferencing, or other audio and visual means.

The Resolution Professional has to circulate the minutes of meeting to all participants by electronic means within forty-eight hours of the said meeting.

VOTING BY THE COMMITTEE

CIRP Regulation 25 deals with voting by members in the Committee of Creditors.

The actions listed in Section 28(1) of the Code, which need prior approval of the Committee of Creditors, has to be compulsorily considered in the meeting of the Committee of Creditors.  Any action other than those listed in Section 28(1) may be considered in meeting of the Committee of Creditors.  The Resolution Professional has to take a vote of the members of Committee of Creditors present in the meeting on any item listed for voting after discussion of the same.

At conclusion of a vote at the meeting, the Resolution Professional has to announce the decision taken on items along with the names of the members of the committee who voted for or against   the decision or abstained from voting.

The Resolution Professional has to circulate the minutes of the meeting by electronic means to all members of the Committee of Creditors and the authorised representative, if any, within 48 hours of the conclusion of the meeting. The Resolution Professional has also to seek a vote of members, who did not vote at the meeting, by electronic voting system where voting will be kept open for at least twenty-four hours from the circulation of the minutes.

The authorised representative has to circulate the minutes of meeting to creditors in a class and announce the voting window at least twenty-four hours before the window opens for voting instructions and keep the voting window open for at least twelve hours.

The auhtorised representative has to cast his vote in respect of each Financial Creditor or on behalf of all Financial Creditors he represents in accordance with the provisions of Section 25A (3A) (3).

VOTING THROUGH ELECTRONIC MEANS

The Resolution Professional has to provide each member of the Committee of Creditors the means to exercise its vote by either electronic means or through electronic voting system. At the end of voting period, the voting portal has to be blocked.  At the conclusion of a vote, the Resolution Professional has to announce and make a written record of the summary of the decision taken on a relevant agenda item along with names of the members of the Committee of Creditors who voted for or against the decision or abstained from voting.  The Resolution Professional has to circulate a copy of the record to all participants by electronic means within twenty-four hours of the conclusion of voting.

__________________________________________

K Shashidhar Vs. Indian Overseas Bank & Ors; Civil Appeal No. 10673/2018

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Leave a Reply

Your email address will not be published. Required fields are marked *