Images Gym Ltd. was granted credit facility of ₹100 lakh under consortium arrangements. Under the consortium, there were 5 five banks, and credit facility provided by the respective banks were as under: A-One Bank Ltd. ₹

Provisions relating to the constitution of the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code, 2016: Section 21 of the Insolvency and Bankruptcy Code, 2016 (IBC) deals with the provisions relating to the committee of creditors (CoC): The interim resolution professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. The committee of creditors shall comprise all financial creditors of the corporate debtor: Provided that a financial creditor or the authorized representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor, shall not have any right of representation, participation or voting in a meeting of the committee of creditors: Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares or completion of such transactions as may be prescribed, prior to the insolvency commencement date. Subject to sub-sections (6) and (6A), where the corporate debtor owes financial debts to two or more financial creditors as part of a consortium or agreement, each such financial creditor shall be part of the committee of creditors and their voting share shall be determined on the basis of the financial debts owed to them. Where any person is a financial creditor as well as an operational creditor- such person shall be a financial creditor to the extent of the financial debt owed by the corporate debtor, and shall be included in the committee of creditors, with voting share proportionate to the extent of financial debts owed to such creditor; such person shall be considered to be an operational creditor to the extent of the operational debt owed by the corporate debtor to such creditor. Where an operational creditor has assigned or legally transferred any operational debt to a financial creditor, the assignee or transferee shall be considered as an operational creditor to the extent of such assignment or legal transfer. Where the terms of the financial debt extended as part of a consortium arrangement or syndicated facility provide for a single trustee or agent to act for all financial creditors, each financial creditor may- authorize the trustee or agent to act on his behalf in the committee of creditors to the extent of his voting share; represent himself in the committee of creditors to the extent of his voting share; appoint an insolvency professional (other than the resolution professional) at his own cost to represent himself in the committee of creditors to the extent of his voting share; or exercise his right to vote to the extent of his voting share with one or more financial creditors jointly or severally. Where a financial debt- is in the form of securities or deposits and the terms of the financial debt provide for appointment of a trustee or agent to act as authorized representative for all the financial creditors, such trustee or agent shall act on behalf of such financial creditors; is owed to a class of creditors exceeding the number as may be specified, other than the creditors covered under clause (a) or sub-section (6), the interim resolution professional shall make an application to the Adjudicating Authority along with the list of all financial creditors, containing the name of an insolvency professional, other than the interim resolution professional, to act as their authorized representative who shall be appointed by the Adjudicating Authority prior to the first meeting of the committee of creditors; is represented by a guardian, executor or administrator, such person shall act as authorized representative on behalf of such financial creditors, and such authorized representative under clause (a) or clause (b) or clause (c) shall attend the meetings of the committee of creditors, and vote on behalf of each financial creditor to the extent of his voting share. The remuneration payable to the authorized representative- under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms of the financial debt or the relevant documentation; and under clause (b) of sub-section (6A) shall be as specified which shall be form part of the insolvency resolution process costs. The Board may specify the manner of voting and the determining of the voting share in respect of financial debts covered under sub-sections (6) and (6A). Save as otherwise provided in this Code, all decisions of the committee of creditors shall be taken by a vote of not less than fifty-one per cent. of voting share of the financial creditors: Provided that where a corporate debtor does not have any financial creditors, the committee of creditors shall be constituted and shall comprise of such persons to exercise such functions in such manner as may be specified. The committee of creditors shall have the right to require the resolution professional to furnish any financial information in relation to the corporate debtor at any time during the corporate insolvency resolution process. The resolution professional shall make available any financial information so required by the committee of creditors under sub-section (9) within a period of seven days of such requisition. As per section 21(2) of IBC the CoC shall comprise of financial creditors. The Operational Creditors do not have right to vote in the meeting of Committee of Creditors, however, the directors, partners and one representative of operational creditors may attend the meetings of Committee of Creditors. Justification of IRP's action: In the instant case, the IRP did not include the Operational Creditors in the CoC. This action of the IRP was justified as per Section 21(2) of the IBC, which clearly states that the Committee of Creditors shall comprise all financial creditors of the corporate debtor. Operational creditors do not have voting rights in the CoC and are generally not part of its constitution, unless specific conditions (like being both a financial and operational creditor) are met, which is not the primary basis for CoC formation.