1. Legal Foundation

Sec 21 IBC - Constitution of CoC:

• CoC comprises all Financial Creditors [FC] - Banks, NBFCs, ARCs, Homebuyers as class.
• Operational creditors have no voting right, only attendance if dues >10% of total.
• Voting share = Financial debt owed / Total financial debt. Not one bank one vote.
• CoC needs 66% voting share to approve resolution plan, replacement of RP, interim finance, etc. 90% for extension beyond 180 days.

Representation Rule - Most important practical rule:
IBBI and NCLT have repeatedly held:

Financial Creditors must be represented in the CoC or in any meeting of CoC by such persons who are competent & are authorised to take decisions on the spot & without deferring decisions for want of any internal approval from financial creditors

NCLT observed in a case where 2 of 4 banks having 77.97% voting rights said they need internal approval from competent authorities - Tribunal said: "We deprecate this practice. The Financial Creditors/Banks must send only those representatives who are competent to take decisions on the spot"

In practice banks send AGM/DGM level with credit committee delegation letter.

2. Modes of Bank Representation

A. Direct Representation - Single Bank as FC
State Bank of India as sole CoC Member having 100% vote share - resolution plan approved by SBI alone is valid

B. Consortium Representation via Lead Bank
Common in Indian infra loans. Example:
During pendency of appeal, Committee of Creditors / Consortium of Banks through UCO Bank, Leader of Consortium. UCO Bank is member of CoC with 33.97% voting rights, consortium authorized UCO Bank to represent CoC
Procedure: Inter-creditor authorization letter + board resolution of each bank authorizing lead.

C. Class Representation via Authorised Representative [AR]
Homebuyers, deposit holders >10 persons form a class, vote internally >50% of that class, AR casts vote as per Sec 25A(3A) - AR will cast vote for all financial creditors he represents in accordance with decision taken by vote of more than 50% voting share of financial creditors he represents who have cast their vote

3. Detailed Case Laws

A. Commercial Wisdom Sovereignty

K. Sashidhar v. Indian Overseas Bank & Ors. (2019) 12 SCC 150 - Supreme Court
Landmark. Supreme Court held CoC has complete autonomy to decide whether resolution plan should be approved or rejected. NCLT or NCLAT cannot interfere with commercial wisdom of CoC, as there is no provision under IBC allowing such intervention. CoC continues to exist till resolution plan is implemented or liquidation order passed - JSW Steel matter, Supreme Court held CoC does not become functus officio merely upon approval of plan

For banks: Your vote is final. Courts will not substitute.

DBS Bank Ltd. Singapore v. Ruchi Soya Industries Ltd. (2024) SC + Essar Steel
DBS Bank held exclusive charge over certain assets and was dissenting FC. CoC approved plan that did not acknowledge bank's argument. DBS appealed.
SC in Amit Metaliks Ltd. (2021) and DBS held: Dissenting secured creditor cannot claim payment as per security value, only liquidation value entitlement. CoC commercial wisdom prevails even over secured dissenting bank. This is now codified as Sec 30(2)(b).

For banks: If you dissent, you get liquidation value, not your collateral value.

B. Who Can Sit in CoC? Exclusion of Related Party Banks

Phoenix ARC Pvt Ltd v. Spade Financial Services & Ors. (2021) SC
Financial Creditor Can Be Excluded From CoC If It Got Rid Of 'Related Party' Label Only With Intention To Circumvent Bar Under Sec 21(2) IBC

Sec 21(2) proviso: Financial creditor or authorized representative if it is related party of corporate debtor shall not have any right of representation, participation or voting
SC held collusive transactions intended to bypass Sec 21(2) will not amount to seat at CoC as Financial Creditor. Related party banks who assigned debt to ARC just before CIRP to get voting - excluded.

Think & Learn Pvt Ltd [BYJU'S] - NCLAT Chennai 2024
On 31.08.2024, RP reconstituted CoC by dropping 2 members viz. Glas Trust Company LLC USA with 99.4% vote share and Aditya Birla Capital. Issue: Whether 99.4% lender is related party? NCLAT examined.

Principle: 99% lender can be removed if related party or fraudulent transaction. CoC composition is not static.

C. Replacement of RP by Banks

Sec 27(2): CoC can replace RP with 66% voting share.

Case: Canara Bank 84.6% + Karnataka Bank 15.4% - Canara Bank held 84.6% voting rights, disputed minutes of first CoC meeting that approved RP continuation at Rs 3 lakh per month, withdrew consent and sought replacement. NCLAT held RP must function independently and cannot be compelled to act according to whims of dominant financial creditor but CoC can replace with 66%.

ELP Law Case - Somani:
NCLT ruled appointment of Mr. K. G. Somani as invalid who was proposed to act as RP by majority voting share of CoC on ground that he was in panel of erstwhile State Bank of Hyderabad now merged with SBI which is member of CoC. SBI being member of CoC appealed. NCLAT overruled NCLT - mere empanelment does not disqualify.

D. CoC Resolution for Liquidation

State Bank of India vs Suryajyothi Spinning Mills Ltd - NCLT Hyderabad
Held CoC Resolution with 66% voting share not a pre-condition for liquidation when no resolution plan received by AA. If no plan, AA can order liquidation even without 66% vote.

Vyshnavi Spices LLP - NCLT Amaravati 2025
After CoC rejected plans and unanimously resolved with 100% voting share to liquidate, NCLT ordered liquidation under Sec 33(2). CIRP commenced on SIDBI petition under Sec 7.

E. Consortium & Interim Finance

Axis Bank Ltd vs Morarjee Textiles Ltd - NCLT Mumbai 2025
Interim finance is financial debt raised by RP during insolvency, therefore as per Sec 28 can only be raised after approval of 66% voting share of CoC. NCLT cannot direct contribution without such approval. Contribution without CoC approval has no basis.

4. Practical Representation Checklist for Bank

1. Claim Filing: File claim in Form C with loan agreement, security documents, latest statement. Delay loses voting.
2. Authorization: Issue board resolution authorizing officer (Scale IV+) to attend CoC, vote, negotiate, sign minutes on spot.
3. Consortium: If JLF, execute inter-se agreement authorizing lead bank to represent, but each bank's voting share still counted separately unless assigned.
4. Voting: Record dissent if you are dissenting secured creditor - else you lose right to liquidation value.
5. Minutes: Insist minutes capture your stand. In Canara Bank case dispute arose because bank disputed minutes.

What banks cannot do:

• Send junior officer who says "I will take approval from HO" - NCLT will deprecate and RP can record non-participation
• Be related party and vote
• Act through RWA - Supreme Court bars RWAs from intervening in builder insolvency, only authorized representative recognized