How Committee of Creditors Voting Thresholds Work Under the IBC

The Committee of Creditors approves a resolution plan under the Insolvency and Bankruptcy Code, 2016 by a vote of 66 percent of the voting share of financial creditors under Section 30(4), reduced from 75 percent by the 2018 Amendment. A 51 percent threshold applies as the default for CoC decisions not otherwise specified, while 66 percent covers CIRP extension and professional replacement, and withdrawal under Section 12A needs 90 percent. Voting shares are proportional to each creditor's debt, and abstaining creditors do not reduce the threshold among those who vote. This article traces how these thresholds evolved and how courts have interpreted them.

The Original Voting Framework Under the IBC, 2016

The Original 75 Percent Threshold Under Section 30(4)

When the Insolvency and Bankruptcy Code, 2016 was enacted, Section 30(4) required the Committee of Creditors to approve a resolution plan by a vote of not less than 75 percent of the voting share of financial creditors. The same 75 percent threshold applied to a range of other CoC decisions under Section 28, including decisions to permit the resolution professional to take certain actions during the CIRP. The single uniform threshold reflected a drafting approach that prioritised creditor consensus and minimised the risk of a bare majority making decisions that could harm a minority with significant economic exposure.

In practice, the 75 percent threshold proved difficult to achieve in large CIRPs where financial creditors were numerous and held different proportions of debt at different interest rates. Cases where a resolution plan was commercially reasonable but could not achieve 75 percent approval due to the holdout behaviour of a small minority began attracting judicial attention.

The 2018 and 2019 Amendments: Differentiated Thresholds

The Insolvency and Bankruptcy Code (Amendment) Act, 2018

The 2018 Amendment reduced the voting threshold for approval of a resolution plan from 75 percent to 66 percent. The stated rationale was to make it easier for resolution plans to achieve approval in complex CIRPs, reducing the leverage of minority blocking creditors and shortening the time between plan submission and approval. The 66 percent threshold for resolution plan approval remains in force under the current Section 30(4).

The Insolvency and Bankruptcy Code (Amendment) Act, 2019

The 2019 Amendment introduced a further differentiation. It retained the 66 percent threshold for resolution plan approval under Section 30(4) but set 51 percent as the default threshold under Section 21(8) for all CoC decisions not otherwise specified in the Code, while retaining 66 percent for the decisions expressly listed as major, including approval of a resolution plan, extension of the CIRP period under Section 12(2), replacement of the resolution professional under Section 22(2), and actions the resolution professional may take under Section 28 during the CIRP. The 2019 Amendment also introduced the concept of an authorised representative for creditors in certain classes, which has significant implications for how voting operates in practice.

How Are Voting Shares Calculated in the Committee of Creditors?

Financial Creditors and Proportional Voting

Voting shares in the CoC are calculated in proportion to the financial debt owed to each financial creditor as assessed by the resolution professional. A financial creditor holding 30 percent of the total financial debt has 30 percent of the voting share. This means that in any significant CIRP, a small number of large creditors (typically public sector banks) hold the majority of the voting power. Minority creditors with small exposures have limited practical influence on CoC decisions even though they are entitled to attend and vote.

The Authorised Representative Mechanism for Homebuyers Under Section 25A

The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, recognized allottees of flats and plots as financial creditors under Section 5(8)(f). This brought potentially thousands of homebuyers into the CoC for real estate CIRP cases. To make CoC voting workable, Section 25A was introduced, creating the authorised representative mechanism. An authorised representative votes on behalf of a class of creditors (such as homebuyers in a real estate CIRP) in accordance with the decision of a majority of that class. Specifically, the authorised representative votes in accordance with the majority (by value) of the class's members, and the entire class's voting share is cast as a single vote.

This mechanism has generated significant litigation about how the authorised representative exercises discretion, what happens when the class decision is split, and whether the NCLT can review the class voting outcome before the authorised representative casts the CoC vote.

Judicial Reinterpretations of Voting Thresholds

What Happens to Dissenting Financial Creditors Under Section 30(4)?

Section 30(4) of the IBC requires the CoC to consider the resolution plan's compliance with Section 30(2) requirements, including provision for dissenting financial creditors. The 2019 Amendment inserted an explanation clarifying that dissenting financial creditors must receive at least the liquidation value of their debt under the resolution plan. This was a response to cases where majority creditors approved plans that offered dissenting minority creditors essentially nothing. The Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531 clarified the NCLT's role: it can review whether dissenting creditor payments comply with the minimum liquidation value floor, but it cannot rewrite the commercial terms of a resolution plan.

The Scope of NCLT Review Over CoC Decisions

A recurring question in IBC litigation is how much latitude the NCLT has to review CoC decisions. Courts have consistently distinguished between commercial and legal review. The CoC's commercial judgment on the value of a resolution plan is not subject to judicial override. But the NCLT must verify that the plan meets the legal requirements of Section 30(2): that it pays operational creditors at least the liquidation value amount, provides for dissenting financial creditors at least the liquidation value floor, and was submitted by an eligible applicant. Where the CoC has applied the correct legal standard and voted by the required threshold, the NCLT cannot substitute its own commercial view.

Does an Abstention Count as a No Vote in CoC Meetings?

A question that has arisen in practice is whether an abstention counts as a 'no' vote for threshold purposes. The IBC does not expressly address this. Courts have held that the voting threshold is calculated on the basis of the voting share of creditors who actually vote, not on the basis of the total voting share in the CoC. A creditor who abstains does not reduce the threshold requirement. This position has practical implications: a well-organised majority can achieve the required percentage even if several creditors choose not to participate in a particular vote.

Current CoC Voting Thresholds at a Glance

Decision: Approval of Resolution Plan. Threshold: 66% of voting share. Statutory Basis: Section 30(4) IBC.

Decision: Extension of CIRP Period (beyond 180 days, up to 330 days total). Threshold: 66% of voting share. Statutory Basis: Section 12(2) IBC.

Decision: Replacement of Resolution Professional. Threshold: 66% of voting share. Statutory Basis: Section 22(2) IBC.

Decision: Decision to Liquidate During CIRP. Threshold: 66% of voting share. Statutory Basis: Section 33(2) IBC.

Decision: Withdrawal of CIRP Application by Applicant. Threshold: 90% of voting share. Statutory Basis: Section 12A IBC.

The 90 Percent Threshold for CIRP Withdrawal Under Section 12A

Section 12A, inserted by the 2018 Amendment, allows a CIRP to be withdrawn after the admission of a petition if the applicant so requests and the CoC approves by 90 percent of the voting share. This is the highest threshold in the IBC. The high threshold is intended to prevent the CIRP process from being misused as a collection tool: an operational creditor or financial creditor should not be able to trigger CIRP, extract a settlement from the corporate debtor, and then withdraw without giving the other creditors a near-unanimous chance to assess whether the withdrawal is in their collective interest.

Frequently Asked Questions

Can the CoC approve a resolution plan by a simple majority of 51 percent?

No. The threshold for approval of a resolution plan under Section 30(4) is 66 percent of the voting share of financial creditors. A 51 percent majority is sufficient only for certain procedural CoC decisions, not for plan approval.

What happens if the CoC is deadlocked and cannot achieve the required threshold?

If no resolution plan achieves CoC approval, the CIRP will eventually expire and the NCLT may order liquidation under Section 33. Courts have been reluctant to intervene in deadlocked CoC situations as a commercial matter, but the NCLT can review whether the CoC is acting in good faith and in accordance with its statutory obligations.

Can the NCLT override the CoC's decision to reject a resolution plan?

The NCLT cannot override the CoC's commercial judgment on the merits of a resolution plan. However, if the CoC's rejection was based on a legally incorrect interpretation of the plan's compliance with Section 30(2), or involved an abuse of process, courts have held that the NCLT has jurisdiction to remand the matter to the CoC for fresh consideration.

How is the authorised representative's vote counted if homebuyers in the class are split between two options?

The authorised representative votes in accordance with the decision of the majority (by value) of the class. If the class majority votes in favour, the entire class's voting share is cast as a 'yes'. If the majority votes against, the entire share is cast as a 'no'. Minority dissent within the class does not result in a split vote at the CoC level.

Does a financial creditor that has assigned its debt to an ARC retain voting rights in the CoC?

Once a financial creditor assigns or transfers its debt to an Asset Reconstruction Company, the ARC steps into its shoes as a financial creditor and holds the corresponding voting rights. The original creditor loses its CoC membership unless it retains a residual interest in the assigned portfolio.

Can the NCLT set aside a resolution plan approved by the CoC by the required threshold if the plan is commercially unfair?

No. Commercial fairness is a matter for the CoC. The NCLT's role is limited to verifying legal compliance with Section 30(2). As long as the plan meets the minimum floor requirements for creditors and was approved by 66 percent of the voting share, the NCLT cannot substitute its commercial judgment for the CoC's decision.

What is the Committee of Creditors and who can be a member?

The Committee of Creditors is the decision-making body of a Corporate Insolvency Resolution Process, constituted by the interim resolution professional under Section 21 of the Insolvency and Bankruptcy Code, 2016 from the list of financial creditors of the corporate debtor. Only financial creditors, or their authorised representatives where creditors are grouped into a class, sit on the Committee of Creditors and vote on its decisions, unless the corporate debtor has no financial creditors, in which case a modified committee applies.

Can operational creditors vote on decisions of the Committee of Creditors?

No. Only financial creditors have voting rights in the Committee of Creditors under Section 21 of the Insolvency and Bankruptcy Code, 2016. Operational creditors can attend committee meetings only if their aggregate dues are at least ten percent of the total debt, and even then they do not have voting rights; they can only participate without a vote. Operational creditors protect their interests instead through the minimum payment safeguards written into Section 30(2) of the Code.

What happens if a resolution plan receives more than 51 percent but less than 66 percent of the voting share?

A resolution plan that receives between 51 percent and 66 percent of the voting share does not satisfy Section 30(4) of the Insolvency and Bankruptcy Code, 2016, which fixes 66 percent as the minimum threshold for approval. Such a plan is not approved by the Committee of Creditors and cannot be submitted to the National Company Law Tribunal for sanction. The resolution professional and prospective resolution applicant would need to revise the plan and seek fresh approval, subject to the time remaining in the CIRP.

What voting share does a single financial creditor need to block a resolution plan on its own?

Any financial creditor or group of financial creditors holding more than 34 percent of the voting share can block approval of a resolution plan, since Section 30(4) requires 66 percent approval and a blocking minority above 34 percent makes that threshold mathematically unreachable. In CIRPs where lending is concentrated among a small number of banks, a single large creditor can sometimes hold a voting share close to or above this blocking threshold.

Is the suspended board of directors of the corporate debtor entitled to vote in the Committee of Creditors?

No. Once the Corporate Insolvency Resolution Process begins, the powers of the board of directors of the corporate debtor are suspended under Section 17 of the Insolvency and Bankruptcy Code, 2016, and those powers vest in the resolution professional. The suspended board and its members are not part of the Committee of Creditors and have no voting rights in CoC decisions, though certain former directors may attend meetings without a vote in a limited representative capacity.

Can a person ineligible under Section 29A be considered as a resolution applicant even if the CoC votes in their favour?

No. Section 29A of the Insolvency and Bankruptcy Code, 2016 disqualifies specified categories of persons, including undischarged insolvents, wilful defaulters and promoters of companies with certain non-performing assets, from submitting a resolution plan. A vote by the Committee of Creditors in favour of a plan submitted by an ineligible applicant does not cure the ineligibility, and the National Company Law Tribunal can refuse to approve such a plan even where the CoC has approved it by the required threshold.

Does a financial creditor's voting share change if it acquires more debt during the CIRP?

Yes. Voting shares in the Committee of Creditors are recalculated whenever the resolution professional updates the list of creditors to reflect claims received, verified or revised during the Corporate Insolvency Resolution Process. If a financial creditor's admitted debt increases or decreases, for example following resolution of a disputed claim, its voting share is adjusted accordingly for all subsequent CoC votes.

Can the Committee of Creditors approve more than one resolution plan at the same time?

The Committee of Creditors evaluates and votes on resolution plans placed before it, and while multiple plans can be discussed and negotiated in parallel during the process, only one resolution plan can ultimately be approved with the 66 percent threshold under Section 30(4) and submitted to the National Company Law Tribunal for sanction in a given Corporate Insolvency Resolution Process. Competing plans that do not achieve the required threshold are not carried forward.

Vikrant D. Shetty | Vikrant D. Shetty leads the Insolvency and Arbitration Practice at Vikrant D. Shetty & Associates, Advocates & Solicitors. The firm advises financial creditors, operational creditors, and corporate debtors in proceedings before the National Company Law Tribunal (NCLT), Mumbai Bench, and represents parties in domestic and international commercial arbitrations seated in India and abroad, including enforcement and challenge proceedings before the Bombay High Court.

Related reading: Interest on Arbitral Awards in India: Pre-Award, Post-Award and Compounding Under Section 31(7).

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please seek direct consultation with an advocate.