LEGAL CHARACTER OF COMMITTEE OF CREDITORS

The expression ‘Committee of Creditors’ has not been defined under the Insolvency and Bankruptcy Code, 2016 (‘Code’ for short). But the Code provides for the constitution of Committee of Creditors (‘CoC’ for short) comprising of Financial Creditors.

The Code requires the Interim Resolution Professional to cause public announcement inviting the creditors of the corporate debtor in two dailies, one in English Language and the other in the local language and fixes the last date for the receipt of the claims. The details of the corporate debtor etc., will be provided in the public announcements. Claims shall be made by the creditors to the Interim Resolution Professional in Form C along with the required documents within the last date mentioned in the public announcement. The Interim Resolution Professional shall verify the claims and prepare the list of creditors. The Interim Resolution Professional shall constitute the Committee of Creditors comprising of financial creditors. The duties to be done by the Interim Resolution Professional/Resolution Professional on the directions issued by the Committee of Creditors.

In Committee of Creditors of Think and Learn Pvt. Ltd. Versus Riju Ravindran, The Board of Control for Cricket in India, Mr Shailendra Ajmera Resolution Professional of M/s Think & Learn Private Limited and GLAS Trust Company LLC - 2026 (2) TMI 1285 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI, corporate insolvency resolution process was initiated against the Think and Learn Private Limited under Section 9 of the Code by the Adjudicating Authority. The Resolution Professional (‘RP’ for short) after collating the claims from the creditors, constituted the CoC on 21.08.2024 consisting of 4 members. The constitution of CoC was placed before the Adjudicating Authority for its records. On 31.08.2024, the Resolution Professional reconstitute the CoC by dropping 2 members, viz., Glas Trust Company LLC, USA with 99.4% of vote sharing and Aditya Birla Capital Limited having a fractional voting share.  The earlier application for the constitution of CoC is yet to be taken on record. The RP filed another application before the Adjudicating Authority for acceptance of the second CoC constituted by him.

The two companies which have been dropped from the CoC filed separate applications before the Adjudicating Authority challenging the removal of them from CoC. The Adjudicating Authority allowed the applications. The Adjudicating Authority held as below-

• The CoC does not have a legal character and that it can be represented only by the Resolution Professional
• Since I.A No.466 of 2025 is directed essentially against Glanis Trust, it alone is the entity who’s right to be in CoC is threatened, and the CoC itself does not have any subsisting interest or right to participate in this proceeding as it is not a necessary party to the proceedings.

Against the said order of the Adjudicating Authority, the CoC filed an appeal before the National Company Law Appellate Tribunal (‘NCLAT’ for short). The appellant submitted the following before NCLAT-

• The definition of the word ‘person’ under Section 3(23) of the Code, is an amalgamated collection of those who are jurisprudentially recognised as a person and also those who are not.
• The CoC is a statutory entity as it is a creation of a statute, and hence it falls within the definition of a person.

The NCLAT heard the submissions of both the parties. The NCLAT considered the following issues to be decided in the present appeal-

• Whether the appeal is properly instituted?
• Has the Committee of Creditors - the CoC, a legal character – a juristic personality to litigate in its name under scheme of the Code as CoC?
• If it is found that CoC has a legal character and has the right to litigate, whether the scheme of the Code mandates that only RP can represent it in any proceedings before the Adjudicating Authority?
• Assuming the CoC has a legal character to litigate in its name, still is it necessary to implead the CoC in a proceeding which a suspended director of the Corporate Debtor has taken out for the removal of a particular financial creditor?

The NCLAT observed that a CoC is not a committee spontaneously created by the volition of the financial creditors but is formed in deference to the statutory conceptualisation. the CoC is conceived as a statutory contrivance, an engine, that runs the entire insolvency resolution process.

• The CoC is not a registered entity under the Companies Act with the characteristic perpetual succession and a common seal that distinguishes a company from those who constitute it.
• It cannot be since it is neither registered nor required to be registered as a society.
• The CoC cannot be considered as a partnership firm since under Sec.4 of the Partnership Act, a partnership is defined as born of an agreement between persons to ‘share the profits of a business carried on by all or any of them acting for all, whereas the members of the CoC hardly are required to be in ad idem, nor any member is required to act for all.
• The CoC does not intend to create profit but to minimise haircut.
• It cannot be, since jurisprudentially a club or association of persons is voluntarily formed for the mutual benefit of all, whereas a CoC is statutorily forged with no requirement for mutual care within it.
• Though part of its responsibility may resemble a trust, for, unlike a trustee, an individual member of the CoC does not forsake their individual benefit that may accrue to them in a resolution process.
• The CoC is merely a collective of those with conflicting interests grouped together for a specific purpose and that dies naturally with the conclusion of the resolution process. Therefore, it is difficult to say that the CoC is a juridical person.

The NCLAT observed that CoC is neither a necessary party, not even a proper property for deciding the issue whether one of its members, the Glas Trust, should be in the CoC, a collective body to be impleaded as a separate party. This issue is concerned with the creditors themselves but not require the CoC. CoC is merely a collective of those with conflicting interests grouped together for a specific purpose.

The NCLAT agreed with the reasoning of the Adjudicating Authority. The CoC is not required to be impleaded as a part in this case, for the removal of Glas Trust. The NCLAT affirmed the decision taken b the Adjudicating Authority.