The Committee of Creditors — the most important decision making body of the IBC regulatory framework — will now come within IBBI’s regulatory fold with the insolvency regulator amending the corporate insolvency regulations to specify that “guidelines” will be issued so as to require the committee and its members to function within its ambit.

The Insolvency and Bankruptcy Board of India (IBBI) has also brought in stipulations to ensure that not more than one revision or modification can be done as regards invitation of expression of interest, invitation of resolution plans and submission of resolution plans.

The move to frame guidelines — which will have the force of law and will be mandatory on CoCs — comes in the wake of rising concerns regarding the manner in which CoC have been seen to act in resolution proceedings, sometimes deliberately delaying the process or hindering effective resolution.

The Standing Committee on Finance had also in its report made a case for introduction of code of conduct for Committee of Creditors.

Expediting resolution process

Ashish Chhawchharia, Partner and National Head - Restructuring Advisory at Grant Thornton Bharat, said that these changes in CIRP regulations will certainly help to hasten the resolution process by restricting unsolicited or delayed bids. Also, this will improve value realisation by limiting iterations and introducing a price discovery mechanism. However, a ‘Swiss challenge’ in resolution plan may not be easy to design, he said.

Charanya Lakshmikumaran, Partner, Lakshmikumaran & Sridharan Attorneys, said, “One of the primary features of the amendment is to require the Committee of Creditors to act in accordance with guidelines to be formulated by the IBBI. This will have a positive impact on resolutions in general by ensuring that the manner of functioning of CoCs is now also regulated”.

The amendments also allow for the expression of interest and the resolution plan to be modified once, after submission, thereby allowing a little room for flexibility, she said.

Sushmita Gandhi, Partner, IndusLaw, said that the legislative intent clearly seems to be to bind CoC within the regulatory fold, just like all other stakeholders in the CIRP.

“But more importantly, the changes to the resolution plan regime and bringing in a challenge mechanism (the discussion paper on this amendment was to bring in a Swiss challenge method which did not find a specific mention in the final amendment) shows an attempt to bring the enactment a step closer to commercial reality and its intention of resolution and value maximisation”, she said.

The cap to single modification is undoubtedly a good step to keep the mechanism time-bound but whether that will cause any disinterest in corporate rescuers is something that one will have to closely observe in the times to come, she said.

Rajeev Vidhani, Partner, Khaitan & Co, said that the purpose of these amendments seems to be to streamline the resolution plan approval process and to introduce more certainty and objectivity to the procedure.

The regulations restricts the modifications which can be made to the invitation for expression of interest, the process document/ request for resolution plan as well as the resolution plan submitted by the resolution applicant, while stipulating restrictions on consideration by CoC of plans which are received outside the timelines or from participants outside the list of qualified applicants, he said.

This will help in making each resolution process more reliable from inception and possibly reduce time spent in defending challenges to the process adopted for approved plans. This also complements Supreme Court’s recent directive on making the 330 days process mandatory, he added.

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