IBBI Proposes Monitoring Committees to Streamline Insolvency Resolution Plans

The Insolvency and Bankruptcy Board of India (IBBI) has proposed the formation of monitoring committees to ensure the effective implementation of resolution plans under the Insolvency and Bankruptcy Code. This follows a Supreme Court judgment emphasizing the need for legal recognition of such committees. Stakeholder feedback is invited by December 9.

The Insolvency and Bankruptcy Board of India (IBBI) has unveiled a proposal to establish monitoring committees aimed at enhancing the implementation of resolution plans under the Insolvency and Bankruptcy Code (IBC) rules.

This initiative addresses challenges in executing resolution plans and is set to enhance stakeholders' confidence in the insolvency resolution process. The proposal gains significance following a recent Supreme Court ruling advocating statutory recognition for these committees to ensure effective plan execution.

The Supreme Court, in its November 7, 2024, judgment, highlighted the necessity for legal backing of such committees, suggesting key guidelines for their formation and operation. The current practice involves constituting these committees based on adjudicating authorities' directions. Crucially, the court advised that the committee of creditors (CoC) should be empowered to establish monitoring committees responsible for overseeing plan implementation and compliance.

A discussion paper by IBBI outlines that the CoC will determine the tenure, composition, and role of these committees, which shall include CoC representatives, the resolution applicant, and an insolvency professional as chairperson. The proposal envisages the successful resolution applicant bearing committee expenses with a cap on chairperson fees. The framework assigns these committees the task of monitoring asset transfer, statutory compliance, and distribution of resolution proceeds, ensuring transparency through quarterly reports to adjudicating authorities and IBBI.

IBBI has requested stakeholders' input on these draft proposals by December 9, aiming to refine the framework.

(With inputs from agencies.)