Class Creditors and Authorised Representatives under IBC

Some corporate debtors owe money to thousands of financial creditors: homebuyers, fixed deposit holders, bondholders. They cannot all attend and vote in meetings of the committee of creditors, and if each voted separately, decisions would be slow and fragmented. The Code solves this by allowing such creditors to act through a trustee, an agent or an authorised representative, and since 2019 by making the class vote as a single bloc. This note explains the routes, the appointment process, the representative's role and the leading case.

1. Three Routes, Section 21(6A)

Figure 1: How classes of financial creditors are represented

• Clause (a): securities and deposits. Where the financial debt is in the form of securities or deposits and the terms provide for a trustee or agent to act for all the creditors, that trustee or agent, such as a debenture trustee, acts on their behalf in the committee.
• Clause (b): classes of creditors. Where financial debt is owed to a class of creditors exceeding the number specified, the interim resolution professional applies to the NCLT, along with the list of creditors in the class, proposing an insolvency professional, other than himself, to act as their authorised representative, who is appointed before the first meeting of the committee; the regulations apply this where there are at least ten financial creditors in a class.
• Clause (c): guardians and executors. Where the financial debt is represented by a guardian, executor or administrator, that person acts as the authorised representative.
• Typical classes. Allottees of real estate projects, holders of fixed deposits and other deposit holders, and holders of bonds or debentures where no trustee arrangement applies.

2. Selecting the Authorised Representative

Figure 2: From announcement to bloc voting

• Choice in the announcement. The public announcement identifies the class and names three insolvency professionals who are willing to act as its authorised representative (Regulation 4A and Form A)
• Claims in Form CA. Creditors in a class file claims in Form CA, indicating their choice of authorised representative from the three names.
• Appointment. The professional chosen by the highest number of creditors in the class is proposed by the interim resolution professional and appointed by the NCLT (Regulation 16A)
• Remuneration. The authorised representative's fee is fixed under the regulations and forms part of the insolvency resolution process costs, so individual creditors do not bear it directly.

3. Rights and Duties, Section 25A

• Section 25A(1). The authorised representative has the right to participate and vote in meetings of the committee on behalf of the financial creditors he represents, in accordance with the prior voting instructions of those creditors obtained through physical or electronic means.
• Section 25A(2). He must circulate the agenda and minutes of the meetings to the creditors he represents.
• Section 25A(3). He must not act against the interest of the financial creditors he represents and must always act in accordance with their prior instructions.
• Section 25A(3A). Inserted in 2019, it provides that he shall cast his vote on behalf of all the financial creditors he represents in accordance with the decision taken by a vote of more than 50 per cent of the voting share of the financial creditors he represents who have cast their vote.

Figure 3: The 2019 change to voting by classes

4. Jaypee Kensington Boulevard Apartments Welfare Association v NBCC, 2021

• Context. In the CIRP of Jaypee Infratech, more than twenty thousand homebuyers formed a class holding a majority of the voting share, and the committee approved NBCC's resolution plan.
• Holding on classes. Decided on 24 March 2021, the Supreme Court upheld the approval and held that, after the 2019 amendment, the authorised representative must cast the vote of the entire class according to the majority of those voting, so homebuyers who dissented or abstained were bound by the class decision.
• Dissenting creditors. It also held that a dissenting financial creditor is entitled under the plan to receive at least its liquidation value in money, not in kind (Topic 41)

5. Classes in Initiation and in Real Estate Cases

• Threshold for applications. Creditors of the classes in section 21(6A)(a) and (b), and allottees of a real estate project, can apply under section 7 only jointly, if at least 100 of them or ten per cent of the class, whichever is less, join the application (provisos to section 7(1); Topic 8)
• Mansi Brar Fernandes, 2025. Among its directions, the Supreme Court asked for regulations ensuring that allottees are properly represented in the committee of creditors, reflecting concerns that homebuyers' interests were not always effectively voiced (Topic 8)

6. Frequently Asked Questions

Do homebuyers vote individually in the committee of creditors?

No. They vote through their authorised representative, who casts the vote of the whole class according to the decision of more than 50 per cent of the voting share of homebuyers who voted, under section 25A(3A).

Who represents debenture holders in the CIRP?

Where the debentures are issued under a trust deed providing for a debenture trustee, the trustee acts for them under section 21(6A)(a). Otherwise, if they form a class of at least ten, an authorised representative is appointed.

Is a homebuyer who did not vote bound by the class decision?

Yes. The vote of the class is cast as a bloc, and the Supreme Court in Jaypee Kensington (2021) held that dissenting and non-voting members of the class are bound by the majority decision.

7. Related Topics

• Topic 8: Real Estate Allottees as Financial Creditors. Homebuyers under the Code.
• Topic 24: Interim Resolution Professional and Public Announcement. Naming the three professionals.
• Topic 25: Committee of Creditors. Constitution and voting.