All NotesCorporate LawInsolvency and Bankruptcy Code, 2016

Insolvency and Bankruptcy Code, 2016

CoC Voting under IBC: 51, 66 and 90 Per Cent Decisions

Voting questions are arithmetic with consequences. The student must identify which decision is being taken, apply the right majority, count abstentions and class votes correctly, and state what follows if the majority is not reached. All majorities are of the total voting share of the committee, not of members present. The four questions below cover a plan vote, a section 28 action, extension and withdrawal, and liquidation.

1. The Law in Brief

The three majorities

Figure 1: The three majorities

  • Default rule. Decisions of the committee need at least 51 per cent of the voting share of the financial creditors, unless the Code requires more (section 21(8))
  • Dissent. Under the CIRP Regulations, a financial creditor that votes against a plan or abstains is a dissenting financial creditor, entitled to the statutory minimum under section 30(2)(b) (Topic 41)
  • Review. The committee's commercial decision to approve or reject a plan cannot be reviewed on its merits by the NCLT or NCLAT; dissenting creditors need not give reasons (K. Sashidhar, 2019)

2. How Is a Resolution Plan Vote Counted?

Facts

The committee of TU Ltd has five members: Bank A with 35 per cent of the voting share, Bank B with 25 per cent, an ARC with 20 per cent, an NBFC with 12 per cent, and a class of homebuyers with 8 per cent, represented by an authorised representative. On a resolution plan, Banks A and B vote for, the ARC votes against and the NBFC abstains. Of the homebuyers who vote, holding 3 per cent of the total voting share between them, those holding 2 per cent vote for and 1 per cent against. Is the plan approved, and what are the consequences for the ARC and the NBFC?

  • Issue. Whether the plan has the 66 per cent approval required by section 30(4), and the status of the creditors who did not support it.
  • Law. Section 30(4) requires approval by at least 66 per cent of the voting share of the financial creditors. Under section 25A(3A), the authorised representative casts the class's entire voting share according to the decision of more than 50 per cent of the voting share of class members who voted. A creditor who votes against or abstains is a dissenting financial creditor.
  • Application. Within the homebuyers' class, 2 of the 3 per cent voting favour the plan, a majority of those voting, so the representative casts the whole 8 per cent for it. The total in favour is 35 + 25 + 8 = 68 per cent. The ARC and the NBFC are dissenting financial creditors.
  • Conclusion. The plan is approved by the committee and goes to the NCLT under section 31. It must pay the ARC and the NBFC at least the minimum under section 30(2)(b), in money and in priority to assenting financial creditors, but they cannot block the plan or ask the NCLT to review its commercial merits.

Working the plan vote

Figure 2: Working the plan vote

3. What Majority Approves Interim Finance under Section 28?

Facts

The resolution professional of VW Ltd needs ₹20 crore of interim finance, above the limit fixed by the committee, secured by a charge on VW Ltd's plant. At a meeting, members holding 55 per cent of the voting share approve; the rest are absent. He raises the finance. A dissenting bank argues the transaction is invalid. Decide. Would the answer be different for a decision to appoint a registered valuer?

  • Issue. Which majority is needed to raise interim finance above the limit and create security, and the effect of acting without it.
  • Law. Section 28(1) lists actions the resolution professional cannot take without the prior approval of the committee, including raising interim finance above the limit it decided and creating any security interest over the debtor's assets. Section 28(3) requires at least 66 per cent of the voting share for such approval. Under section 28(4), an action taken without the required approval is void. Other decisions, such as appointing a valuer, need only 51 per cent under section 21(8)
  • Application. The approval had only 55 per cent, short of 66 per cent. Absent members still count in the total voting share.
  • Conclusion. The approval is invalid and the interim finance and the charge are void; the committee may also report the resolution professional to the IBBI. A decision to appoint a registered valuer would have been valid with 55 per cent.

4. What Vote Extends the CIRP or Allows Withdrawal?

Facts

The CIRP of XY Ltd began on 1 January 2026. On day 170, the committee votes 70 per cent to seek an extension of 90 days. On day 200, before any invitation for plans has been issued, the promoters offer a settlement, and creditors holding 88 per cent vote for withdrawal. Two weeks later, after more creditors are persuaded, the vote reaches 91 per cent. Advise on the extension and the withdrawal.

  • Issue. The majority for extending the CIRP and for withdrawal under section 12A.
  • Law. Under section 12(2), the resolution professional applies for extension if the committee so resolves by 66 per cent, and the NCLT may extend the period once by up to 90 days, within the 330-day outer limit. Section 12A permits withdrawal of an admitted application with the approval of 90 per cent of the voting share, and after 2026 not after the first invitation for resolution plans.
  • Application. The 70 per cent resolution meets the 66 per cent requirement for extension. The first withdrawal vote of 88 per cent falls short of 90 per cent; the second of 91 per cent meets it, and no invitation has yet been issued.
  • Conclusion. The extension may be granted by the NCLT. The withdrawal application, made through the resolution professional after the 91 per cent vote, may be allowed. Had the first invitation for plans been issued in the meantime, withdrawal would have been barred.

5. What Vote Is Needed to Liquidate or Restore the CIRP?

Facts

The committee of ZA Ltd receives no viable plan. Creditors holding 60 per cent vote to liquidate. The resolution professional applies to the NCLT for a liquidation order. Later, a second vote of 70 per cent is passed and liquidation is ordered. Three months into liquidation, a new investor appears, and creditors holding 68 per cent vote to restore the CIRP. Advise.

  • Issue. The majority needed to decide on liquidation during the CIRP, and to restore the CIRP after liquidation is ordered.
  • Law. Under section 33(2), the committee may resolve by at least 66 per cent to liquidate the corporate debtor at any time during the CIRP before confirmation of a plan, and the NCLT must then order liquidation; after 2026, it may instead decide on dissolution. Section 33(1A) and (1B), inserted in 2026, allow the committee, once, by 66 per cent, to seek restoration of the CIRP for up to 120 days.
  • Application. The 60 per cent vote did not meet the threshold, so the first application should have failed. The 70 per cent vote met it. The 68 per cent vote for restoration also meets 66 per cent, and no earlier restoration has been sought.
  • Conclusion. Liquidation was validly ordered on the second vote. The committee may apply for restoration of the CIRP, which, if allowed, runs for up to 120 days to consider the new investor's plan. This is available only once.

⚠ Exam trap

All majorities are of the total voting share, so absentees count against. 51 per cent for routine decisions; 66 per cent for plans, appointment or replacement of the RP, section 28 actions, extension, liquidation and restoration; 90 per cent for withdrawal. Abstention makes a creditor dissenting. A class votes as one block by a majority of those who voted. An action under section 28 without 66 per cent approval is void (s. 28(4)). The committee's commercial decision is not reviewable on merits (K. Sashidhar, 2019).

6. Frequently Asked Questions

Must dissenting creditors give reasons?

No. K. Sashidhar (2019) held that the Code does not require reasons, and the NCLT cannot review the commercial merits of the vote.

Was the majority for plans always 66 per cent?

No. It was 75 per cent until the Second Amendment Act of 2018 reduced it to 66 per cent (Topic 94).

Can the committee approve a plan by a majority of those present at the meeting?

No. The threshold is a percentage of the voting share of all financial creditors in the committee, whether or not they attend.

7. Related Topics

  • Topic 25: Committee of Creditors. Constitution and voting.
  • Topic 28: Commercial Wisdom of the CoC. Judicial deference.
  • Topic 111: Replacing the Resolution Professional under IBC. Replacement and challenges.