Authorised Representation under Sections 21(6) & 21(6A) of IBC

Subject to sub-sections (6) and (6A), when a corporate debtor owes financial debts to two or more creditors under a consortium or similar agreement, each financial creditor becomes a member of the Committee of Creditors (CoC). Their voting share in the CoC is determined in proportion to the amount of financial debt owed to them [Section 21(3)]. This ensures that every creditor’s vote is weighted according to their exposure, while still allowing the rules under Sections 21(6) and 21(6A) to apply regarding representation and voting flexibility.

 Section 21(6) IBC deals with the representation of financial creditors in the CoC, especially in cases of consortium or syndicated loans. When multiple financial creditors have given debt under a consortium arrangement or a syndicated facility, the loan documents often provide for a single trustee/agent (for example, a debenture trustee, security trustee, or facility agent) to act on behalf of all lenders.

This provision ensures that even when a trustee or agent is appointed for administrative convenience, each financial creditor retains flexibility and autonomy in how its voting share is exercised within the CoC. The options available to creditors include:

1. Authorising the trustee/agent to act on their behalf and exercise their voting rights.

2. Personally representing themselves in the CoC in proportion to their voting share.

3. Appointing an independent insolvency professional (other than the resolution professional), at their own cost, to represent them.

4. Voting jointly or separately with other creditors, depending on their interests, in proportion to their voting share.

Thus, Section 21(6) balances efficiency and independence by preserving the individuality of each financial creditor’s rights, while also allowing collective action where creditors choose to combine their votes.

When a company has borrowed under a consortium or syndicated loan, the loan documents often appoint a trustee or agent to act on behalf of all lenders. However, Section 21(6) of the IBC makes it clear that each financial creditor continues to retain its own independent voting rights in the CoC.

For example, if ABC Ltd. has borrowed ₹1,000 crore from three banks—Bank A (₹400 crore), Bank B (₹300 crore), and Bank C (₹300 crore)—through a consortium with a facility agent, each bank’s voting share in the CoC will be in proportion to its exposure (40%, 30%, and 30%). At this stage, Bank A may authorise the trustee to vote for it, Bank B may decide to attend the CoC meetings and vote directly, and Bank C may even appoint an insolvency professional at its own cost to represent it. Further, any of them may choose to vote jointly or severally with other lenders. Thus, even where a trustee or agent exists, the law ensures that every financial creditor has flexibility and independence in deciding how its voting share is exercised in the CoC.

Voting Jointly or Separately with Other Creditors

Under normal circumstances, each creditor casts its vote individually in the CoC. However, Section 21(6)(d) of the IBC provides flexibility by allowing creditors to coordinate their voting strategy.

• Joint Voting: Two or more creditors may agree to vote together on a particular matter, and their voting shares are combined for that decision. For example, if Bank B (30%) and Bank C (30%) both vote in favour of a resolution plan, their combined 60% counts as a block “Yes” vote.
• Separate Voting: Creditors may also choose to act independently, even within the same consortium. In such cases, each vote is counted separately in proportion to the creditor’s share. For instance, Bank B votes “Yes” (30%) while Bank C votes “No” (30%), and the votes are tallied individually along with others.

This provision ensures autonomy by protecting the right of each creditor to vote independently, while also enabling collaboration where creditors wish to act collectively. In essence, clause (d) empowers financial creditors to either pool their strength through joint voting or preserve their independence through separate voting, depending on what best serves their commercial interests.

 Purpose for inclusion clause(d):

Clause (d) was included to provide financial creditors in consortium or syndicated loans with flexibility and control over their voting rights in the Committee of Creditors. It preserves independence by allowing each lender to vote separately according to its own commercial interests, rather than being compelled to follow the majority. At the same time, it encourages collaboration, enabling smaller creditors to pool their votes and form a stronger block, which is important given high voting thresholds such as 66% or 75%. The clause also balances efficiency and autonomy, allowing joint voting when creditors agree and separate voting when they differ, thereby avoiding both domination by majority creditors and fragmentation of decision-making. Additionally, it protects minority creditors by giving them the option to combine their votes and meaningfully influence the outcome.

AR appointed under Section 21(6A)

Section 21(6A) deals with the appointment of an authorised representative for financial creditors in certain situations, ensuring effective participation in the CoC.

1. Securities or Deposits with a Trustee/Agent (Clause a): If the financial debt is in the form of securities or deposits and the terms allow for a trustee or agent, that trustee/agent acts as the authorised representative for all such financial creditors. The trustee/agent attends CoC meetings and votes according to the voting share of each creditor.

2. Large Class of Creditors (Clause b): When a financial debt is owed to a large number of creditors (exceeding a number specified in regulations), and they are not covered under clauses (a) or Section 21(6), the interim resolution professional (IRP) must apply to the Adjudicating Authority. The application includes a list of all creditors and a nominated insolvency professional (other than the IRP) to act as their authorised representative. The Adjudicating Authority appoints this representative before the first CoC meeting.

3. Guardians, Executors, or Administrators (Clause c): If the creditor is a minor or otherwise represented by a guardian, executor, or administrator, such person acts as the authorised representative.

In all these cases, the authorised representative attends CoC meetings and votes on behalf of each financial creditor in proportion to their voting share. Section 21(6A) ensures that even where there are many creditors or creditors represented by a third party, the CoC can function efficiently through an authorised representative, while preserving each creditor’s voting rights.

Comparison between Section 21(6) and Section 21(6A) of the IBC: 

Section 21(6) of the IBC applies to financial creditors in consortium or syndicated loans, giving them flexibility to either authorise the trustee/agent, represent themselves, appoint an insolvency professional, or vote jointly/separately in the Committee of Creditors. In contrast, Section 21(6A) applies to special cases such as securities/deposits with a trustee, large classes of creditors, or creditors represented by a guardian, executor, or administrator, where an authorised representative must be appointed to attend CoC meetings and vote on behalf of the creditors. Thus, while 21(6) preserves individual choice, 21(6A) ensures mandatory representation for efficient functioning of the CoC in specific scenarios.

Remuneration of AR appointed under Section 21(6A)

 Section 21(6B) deals with the remuneration of AR appointed under Section 21(6A).

1. Clauses (a) and (c) of 21(6A): These cover ARs appointed as trustee/agent for securities or deposits (clause a) and guardians, executors, or administrators representing creditors (clause c). Their remuneration, if any, is determined as per the terms of the financial debt or the relevant loan/security documentation.

2. Clause (b) of 21(6A): This covers ARs appointed for a large class of creditors through the Adjudicating Authority. Their remuneration is specified by the Authority and forms part of the insolvency resolution process costs, recoverable as part of the CIRP expenses.

Section 21(6B) ensures that ARs are compensated either according to the underlying debt agreements (for trustees or guardians) or as part of the CIRP costs (for ARs appointed for large creditor classes), maintaining clarity on payment obligations.

Example:

1. Clause (a) / (c) – Trustee or Guardian: ABC Ltd. has issued debentures worth ₹200 crore to multiple investors, with a debenture trustee appointed to represent all investors in the CoC. The debenture trust deed states that the trustee is entitled to a fee of ₹2 lakh per CoC meeting. Here, the trustee’s remuneration is as per the terms of the financial debt, in line with Section 21(6B)(i).

Similarly, if a minor shareholder’s guardian represents the creditor, the remuneration (if any) may be as agreed in the underlying documentation or law.

2. Clause (b) – Large class of creditors: XYZ Ltd. owes ₹50 crore to 500 small depositors, and an insolvency professional is appointed as their AR by the Adjudicating Authority. The Authority fixes the remuneration of the AR at ₹1 lakh for the CIRP, which is treated as part of the insolvency resolution process costs recoverable from the corporate debtor, as per Section 21(6B)(ii).

AR appointed under Section 24(5)

Section 24(5) provides that, subject to sub-sections (6), (6A), and (6B) of Section 21, any financial creditor who is a member of the CoC may appoint an insolvency professional, other than the resolution professional, to represent them in CoC meetings. The proviso clarifies that the fees of such an insolvency professional are to be borne solely by the creditor who appoints them, and are not part of the insolvency resolution process costs. This ensures that individual creditors can secure professional representation in CoC deliberations while maintaining clear responsibility for the associated costs.

While Sections 21(6) and 21(6A) deal with the representation of financial creditors through trustees, agents, or authorised representatives, primarily in consortium loans, syndicated facilities, large creditor classes, or special cases, Section 24(5) provides an additional safeguard for individual creditors. It allows any creditor in the CoC to personally appoint an insolvency professional (other than the resolution professional) to represent them, even when a trustee or authorised representative exists.

The key purposes are:

1. Protect Individual Autonomy: Ensures that even if a trustee, agent, or AR is appointed, an individual creditor can still have direct professional representation according to their own interests.

2. Flexibility: Provides creditors the option to seek expert guidance on complex issues during CoC meetings without relying solely on the authorised representative.

3. Clarity on Cost Responsibility: The proviso makes it clear that the fees of the appointed insolvency professional are borne by the creditor alone, preventing any disputes or claims on CIRP costs.

Section 24(5) complements Sections 21(6) and 21(6A) by strengthening creditor rights and autonomy, ensuring professional representation is accessible even in the presence of collective representation mechanisms. Even if a trustee or authorised representative exists, individual creditors can engage their own insolvency professional under Section 24(5), while the costs remain their responsibility.

Example: ABC Ltd. has defaulted on a consortium loan of ₹300 crore provided by three banks:

• Bank A: ₹150 crore (50% voting share)
• Bank B: ₹100 crore (33.3%)
• Bank C: ₹50 crore (16.7%)

A trustee/agent has been appointed under Section 21(6) to represent all banks in the Committee of Creditors (CoC). The trustee’s remuneration is ₹2 lakh per meeting, as per Section 21(6B)(i). Now, Bank B wants to appoint its own insolvency professional to represent it in the CoC to provide expert advice on a resolution plan, under Section 24(5). The fees of this insolvency professional are borne entirely by Bank B and are not part of CIRP costs.

In this scenario:

• Section 21(6) allows the trustee to act for all creditors.
• Section 21(6B) clarifies the remuneration of the trustee.
• Section 24(5) ensures Bank B can still have its own professional representative, protecting its independent interests and voting rights.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.