Once the Corporate Insolvency Resolution Process (the “CIRP”) has been initiated under Sections 7, 8 and 9 of the Insolvency and Bankruptcy Code,2016 (the “Code”), the Resolution Professional (the “RP”) shall constitute a Committee of Creditors (the “CoC”) under Section 21 of the Code.
Section 21(2) of the Code states that the CoC “shall comprise all financial creditors of the corporate debtor”.
Section 24 of the Code provides for “Meeting of committee of creditors”, which specifies those who may be present at the meetings of the CoC.
Sections 24(3) & (4) state that the directors, partners and one representative of the operational creditors may be present at the meeting but do not have the right to vote in such meetings.
“24. Meeting of committee of creditors
(3) The resolution professional shall give notice of each meeting of the committee of creditors to
(a) members of 1 [committee of creditors, including the authorized 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 director, partner or representative of operational creditors, as the case may be, shall not invalidate proceedings of such meeting.”
The purpose, of the Code in appointing a Resolution Professional and initiating the CIRP is to take away complete control of the corporate debtor from its board at the time of insolvency. Therefore, the Code has provided for the directors/partners of the corporate board/person to be able to be present at the meetings of the CoC but stated that they would possess no voting rights at such meetings.