Insolvency regulator IBBI proposes to make constitution of monitoring committee mandatory for implementation of all resolution plans under Corporate Insolvency Resolution Process (CIRP).
It has issued a discussion paper for this purpose and public comments can be sent by December 9.
The proposed move is fallout of the Supreme Court judgement in State Bank of India & Ors vs The Consortium of Mr Murari Lal Jalan and Mr Florian Fritsch &Anr which emphasised the need for statutory recognition of monitoring committees and made several key recommendations regarding their constitution and functioning.
While the current framework under Regulation 38 of the CIRP Regulations provide certain basic recognition to monitoring committees, the proposed amendments aim to make their constitution mandatory for implementation of all resolution plans.
The committee
Since the CoC is vested with commercial wisdom and is the primary decision-making body during CIRP, the proposed framework empowers the CoC to take the final decision on the constitution, composition, and functioning period of the monitoring committee, as part of the resolution plan. The CoC would retain the flexibility to decide for constitution of monitoring committee with lesser period if the resolution plan provides for substantial implementation during such tenure with recorded reasons, IBBI discussion paper said.
The monitoring committee should consist of members who have a direct stake in the successful implementation of the resolution plan. The committee shall be chaired by either the resolution professional who handled the CIRP or another insolvency professional as proposed by the CoC, IBBI discussion paper has said.
Representation
To ensure balanced representation of interests, the committee shall include nominee(s) from the CoC and an equal number of nominee(s) from the successful resolution applicant.
This composition structure ensures that both the creditors’ interests and the implementation capabilities of the resolution applicant are adequately represented in the monitoring process.
The framework also provides flexibility to exclude existing members in case of changes or include additional persons as deemed appropriate by the committee. To maintain operational efficiency and accountability, it has been provided that the successful resolution applicant shall bear all expenses of the monitoring committee, while retaining the existing provision that the IP’s monthly fee is capped at the amount received by the resolution professional during the CIRP period.
The monitoring committee is empowered with comprehensive supervision and monitoring functions, including oversight of plan implementation, ensuring statutory compliance, and facilitating smooth transfer of assets and control to the successful resolution applicant.
To ensure transparency and accountability, the committee shall submit quarterly progress reports to the Adjudicating Authority and the Board regarding the implementation status.
Siddharth Srivastava, Partner at Khaitan & Co, said this move will ensure greater transparency and accountability to achieve the successful implementation of the plan and will streamline the process. “This will also ensure mandatory representation of the coc members in the committee leading to greater oversight. Much needed move”, he said.
Yogendra Aldak, partner, Lakshmikumaran and Sridharan, said that the mandatory constitution of the Monitoring Committee to supervise the implementation of the approved resolution plan would help in achieving the objectives of the Insolvency and Bankruptcy Code, 2016 to simplify and expedite the insolvency proceedings.
Hari Hara Mishra, CEO, Association of ARCs in India, said that the proof of the pudding is in the eating, and similarly the effectiveness of resolution plan lies in its effective implementation.
“A monitoring committee empowered under regulation to have oversight of the implementation of the approved resolution plan and submission of quarterly progress reports thereof will bring implementation part in sharp focus and ensure better resolution outcome”, he said.