Creditor Oversight: IBBI Proposals to Strengthen Corporate Insolvency Resolution Process (CIRP) Integrity
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Insolvency and Bankruptcy Board of India (IBBI) | National Company Law Tribunal (NCLT)
The IBBI Discussion Paper (February 2026) mentions a series of proposed amendments to the CIRP Regulations aimed at enhancing procedural clarity, creditor oversight, and value maximization. To address implementation challenges, the Board suggests strengthening the recording of Committee of Creditors (CoC) deliberations during resolution plan approvals to prevent future litigation and disputes. Key proposals include rationalizing the framework for approving insolvency resolution process costs (CIRP Costs) and formalizing the CoC’s role in evaluating delayed claims before they reach the Adjudicating Authority. Additionally, the paper recommends excluding related-party operational creditors from committees constituted exclusively of OCs to ensure unbiased decision-making. These refinements seek to codify sound practices that have evolved through the IBC’s implementation, aiming for a more predictable and time-bound resolution process.
Key Pillars of the Proposed IBBI Refinements
Deliberation Transparency: Strengthening the mandatory recording of CoC discussions while approving resolution plans to ensure a robust “audit trail” for judicial review.
Operational Discipline: Rationalizing how CIRP Costs are approved and making data-backed decisions on continuing operations of the Corporate Debtor (CD) as a going concern.
Claim Management: Clarifying the CoC’s responsibility in accepting or rejecting delayed claims to reduce the administrative burden on the NCLT.
Committee Integrity: Excluding related operational creditors from OC-only committees to prevent conflicts of interest in the absence of financial creditors.
Value Maximization: Improving procedural discipline to prevent the escalation of costs and ensure optimal recovery for all stakeholders.
What is the Corporate Insolvency Resolution Process (CIRP)? CIRP is a time-bound recovery mechanism under the Insolvency and Bankruptcy Code (IBC), 2016, designed to revive a “Corporate Debtor” (a company in default) rather than opting for immediate liquidation. Once a case is admitted by the Adjudicating Authority (NCLT), a Committee of Creditors (CoC) is formed to oversee the company’s affairs, managed by a Resolution Professional. The process aims to achieve value maximisation by inviting “Resolution Plans” from eligible bidders to take over and turn around the business. Under the new IBBI proposals, the CoC’s role is being sharpened to ensure greater procedural discipline, particularly in recording deliberations and managing CIRP Costs, to prevent delays and ensure the company remains a “going concern” throughout the litigation.
What are “CIRP Costs”? CIRP Costs refer to the essential expenses incurred during the Corporate Insolvency Resolution Process to maintain the corporate debtor as a “going concern” and complete the resolution. These include the fees of the resolution professional, costs of interim finance, and operational expenses like electricity, employee salaries, and raw materials. Under the proposed IBBI amendments, the Committee of Creditors (CoC) will have a more structured role in approving these costs. Proper oversight of CIRP Costs is critical because they are paid in priority over all other debts; excessive or unmonitored costs can erode the final value available for distribution to creditors, potentially undermining the primary goal of value maximization.
Policy Relevance
The shift toward “Procedural Discipline” represents a transition from “Ad-hoc Resolution” to “Standardized Insolvency Governance,” ensuring that India’s credit markets remain resilient and attractive to global investors.
Strategic Impact:
Federal Ease of Doing Business: Strengthening CoC deliberations reduces the “Implementation Friction” at the NCLT level, helping India maintain its lead in the World Bank’s insolvency rankings.
Standardizing Creditor Accountability: By formalizing the CoC’s role in managing delayed claims, IBBI is acting as a “Standard Maker,” establishing a predictable legal template that reduces the 600+ days currently taken for resolutions.
Bypassing Litigation Bottlenecks: The mandatory recording of deliberations ensures that judicial authorities have a clear “Trust Architecture” to rely on, preventing vexatious appeals that often stall the $300 billion credit recovery pipeline.
Operationalizing Ethical Committees: Excluding related-party OCs ensures that the interests of micro and small enterprises are protected from “Implementation Arbitrage” by larger influential entities.
Value Deepening for Banks: Rationalizing CIRP Costs ensures that the final resolution proceeds are not “hollowed out” by administrative expenses, directly supporting the capital adequacy of the public and private banking sectors.
Follow the full report here: Discussion Paper on strengthening CoC’s oversight and procedural clarity under the CIRP Regulations, 2016