Financial Creditor of M/s XYZ Ltd. (Corporate Debtor) filed an application for Corporate Insolvency Resolution Process (CIRP) before the Adjudicating Authority and Interim Resolution Professional (IRP) was appointed. The

Formation of Committee of Creditors (CoC) when all Financial Creditors are Related Parties: The provisions as contained in the Regulation 16 of the Insolvency and Bankruptcy (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 are very much relevant in this regard. This Regulation provides as under: Where the corporate debtor has no financial debt or where all financial creditors are related parties of the corporate debtor, the committee shall be set up in accordance with this Regulation. The committee formed under this Regulation shall consist of following members:- eighteen largest operational creditors by value: Provided that if the number of operational creditors is less than eighteen, the committee shall include all such operational creditors; one representative elected by all workmen other than those workmen included under sub-clause (a); and one representative elected by all employees other than those employees included under sub-clause (a). Every member of the committee formed under this Regulation shall have 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. Explanation - For the purposes of this sub-regulation, 'total debt' means the sum of- the amount of debt due to the creditors listed in sub-regulation 2(a); the amount of the aggregate debt due to workmen under sub regulation 2(b); and the amount of the aggregate debt due to employees under sub regulation 2(c) A committee formed under this Regulation and its members shall have the same rights, powers, duties and obligations as a committee comprising financial creditors and its members, as the case may be. Now, according to the above Regulation 16 the answer to the given problem is as under: Since all the Financial Creditors are related party to the Corporate Debtor, hence no Financial Creditor shall be a part of the CoC as per Regulation 16(1). Further since there are Operation Creditors and their numbers are FIVE, hence all such Operational Creditors will be included in the CoC. As required by Regulation 16(2)(b) & (c) one representative shall also be included in the CoC.