The Insolvency and Bankruptcy Board of India (IBBI) recently amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 vide IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021. The same is enacted pursuant to the discussion paper (“IBBI discussion paper”) circulated by the IBBI soliciting feedback on its proposals. The latest set of amendments[1] to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) proposes some very critical changes with respect to the flow of a CIRP and its regulation. Most importantly, it proposes a code of conduct regulating the Committee of Creditors (CoC).[2] Further, it introduces challenge method as an option for the resolution professional to call resolution plans.[3] Amongst these, there are alterations that seek to ensure strict adherence to the timeline of the CIRP to ensure time boundedness.


A. Deconstructing the Amendments

The first amendment has been made in Regulation 17 by inserting the sub-regulation (1-A) after sub-regulation (1) to it.

The said Amendment read as follows:

Regulation 17(1-A) The committee and members of the committee shall discharge functions and exercise powers under the Code and these regulations in respect of the corporate insolvency resolution process in compliance with the guidelines as may be issued by the Board.[4]


The IBBI is yet to issue any recommendations. However, the guidelines that could be released by the IBBI are expected to lay out the principles provided in the annexure of the IBBI discussion paper[5] which are as follows:

  1. A member of the Committee of Creditors, while discharging its duties shall abide by the following code of conduct, as an individual and jointly with other members of the committee.
  2. A member of the committee shall, amongst other guidelines:

(a) Maintain integrity in performing its roles and functions under the Code.

(b) Must not misrepresent any facts or situations and should refrain from being involved in any  action that is detrimental to the objectives of the Code.

(c) Must maintain objectivity in exercising decisions on the subject-matter bestowed to the  committee under the Code.

(d) Must disclose the details of any conflict of interests to the stakeholders, whenever it comes across such conflict of interest during a process.

(e) Not acquire, directly or indirectly, any of the assets of the debtor, nor knowingly permit any relative of the committee member to do so, without making a disclosure to the stakeholders.

(f) Not adopt any illegal or improper means to achieve any objective.

(g) Cooperate with the insolvency professional in discharging his duties under the Code.

(h) Not influence the decision or the work of committee so as to make undue gain or advantage for itself or its related parties.

(i) Disclose the existence of any pecuniary or personal relationship with any stakeholders entitled to distribution, as soon as it becomes aware of it.

(j) Ensure that decisions are made without any bias, favour, fear, coercion, undue influence or conflict of interest.

(k) Maintain transparency in all activities and decision making.[6]


In order to understand why IBBI brought these guidelines, one may look to the Parliamentary Standing Committee Report which made recommendations to have a professional code of conduct for CoC, which will define and circumscribe their decisions and also recommended the IBBI to frame guidelines for the selection of RPs by the CoC in a more transparent manner.[7]


The 2nd amendment is to ensure that the process of resolution is timely executed. Prior to the amendment, Regulation 36-A of the CIRP Regulations contained provision regarding the invitation for expression of interest (EoI). The said invitation is to contain details regarding the criteria for prospective resolution applicants and also provide such basic information about the corporate debtor as may be required by a prospective resolution applicant for expression of interest, amongst other guidelines. However, there is no stipulation on how many times this invitation could be amended.


Similarly, Regulation 36-B of the CIRP Regulations contained provision regarding the request for resolution plans. It provided for a minimum of 30 days for prospective resolution applicants to submit the plans and allows for revision/modification of the request for resolution plan (RFRP) subject to the 30 days timeline but there was no cap on the number of revisions that may be allowed in a resolution plan.

The same was found by the IBBI to afflict the resolution process with delay.

Resultantly, the amendment adds clause (4-A) to Regulation 36-A and a proviso to Regulation 36-B(5), which stipulate:


Regulation 36-A (4-A)— Any modification in the invitation for expression of interest may be made in the manner as the initial invitation for expression of interest was made:

Provided that such modification shall not be made more than once.

Regulation 36-B (5)— Any modification in the request for resolution plan or the evaluation matrix issued under sub-regulation (1), shall be deemed to be a fresh issue and shall be subject to timeline under sub-regulation (3).

Provided that such modifications shall not be made more than once.

The 3rd amendment was with respect to the instances where the resolution applicants revise the resolution plans multiple times, with or without the consent of the CoC, leading to delays in completing the process.


To this, the Committee suggested a Swiss challenge method, wherein once a bid from one bidder is received and approved, then the floor is opened to the challenger. If the original bidder agrees to match the offer given by the challenging bidder in its own proposal, then bid is awarded to him, else it is awarded to the challenging bidder.


To this effect, sub-clause (1-A) is added to Regulation 39, which stipulates:

39A (1-A) – The resolution professional may, if envisaged in the request for resolution plan

(a) allow modification of the resolution plan received under sub-regulation (1), but not more than once; or

(b) use a challenge mechanism to enable resolution applicants to improve their plans.

(1-B) The Committee shall not consider any resolution plan—

(a) received after the time as specified by the committee under Regulation 36-B; or

(b) received from a person who does not appear in the final list of prospective resolution applicants; or

(c) does not comply with the provisions of sub-section (2) of Section 30 and sub-regulation (1).


Regulation 39-A(1-A)(b) expressly crystallises the swiss challenge mechanism into the resolution process under the IB Code. It must be noted here that Regulation 39-A earlier did not contain any prohibition on the usage of swiss challenge method during the CIRP process.[8]


Furthermore, the amendment also put an embargo on the CoC from considering resolution plans that are: (1) received after a certain time; or (2) received from persons who are not part of the final list of prospective resolution applicants; and (3) not compliant with Section 30 of the Insolvency and Bankruptcy Code, 2016.

B. Broader Issues with the Amendment

Now that the salient features of the amendment are discussed, and before we proceed with the brief analysis, it is important to understand what powers does the CoC enjoy and why there is a need felt for bringing a code of conduct.

Need to balance the “commercial wisdom of the CoC” with the absoluteness of power


The IB Code is designed so that those stakeholders who have the biggest stake, at the same time possess the financial expertise to resolve insolvency resolution, play the prominent role. It is in furtherance of this objective that the judicial interference of the NCLT, NCLAT and the Supreme Court is sought to be minimum and majority of the decisions taken by the CoC are held to be non-justiciable.


For instance, the CoC enjoys complete autonomy in the following matters:

(i) who to appoint as the RP;

(ii) replace the RP;

(iii) direct liquidation of the corporate debtor whenever it wants;

(iv) negotiate with the bidders and seek revisions of the bids;

(v) specify the criteria for prospective resolution applicants when inviting expression of interests; and

(vi) seek extension of the time period of resolution process.

In such matters, the decision of the CoC is beyond the purview of judicial interference.


The Supreme Court through various judicial pronouncements have clarified the role and responsibilities of the CoC and established the primacy of “commercial wisdom of CoC” in deciding the fate of the corporate debtor undergoing CIRP.[9] As a result, the Supreme Court has consistently acknowledged the relevance of the CoC and relies on the commercial wisdom of the CoC.


Now with the adoption of a code of conduct, the expansive scope of power available to the CoC stands to get circumscribed. The avoidable experiences borne during the working of the IB Code, such as the following, are the reasons why the code of conduct was felt necessary:

(i) When the CoC, usurping the role of the RP, on its own, adjudicated on if a creditor is a financial or an operational creditor.

(ii) When the decision-making by the CoC members is riddled with red tapism, so much so that in an instance the CoC did not approve appointment of IRP as RP since two of the four financial creditors, having aggregate voting rights of 77.97% required internal approvals from their competent authorities.

(iii) When a financial creditor decided to engage an entity for services during CIRP. It proposed the name of an IP for appointment as IRP in the application, after having an understanding with him that on his appointment as the IRP, he shall appoint that entity. The IRP appointed the said entity on the date of commencement of CIRP. The fee of entity was 20 times of the fee of the IRP/RP.

(iv) When the lead FC recovered debt during moratorium from the company’s account it was maintaining. In liquidation, even when the company was a going concern and a scheme under Section 230 of the Companies Act, 2013 was under consideration, and despite instruction to contrary from the NCLT, the liquidator distributed Rs 26 crore to FCs under their pressure.


Clearly, the above-mentioned instances are outside the ambit of the IB Code and could not be saved from the broad ambit of the commercial wisdom of the CoC.


Now the fundamental concerns with respect to these amendments seem to not stem from the objective sought to be achieved, but they seem rather focused on the effect that these amendments could directly (or indirectly) end up bringing about to the insolvency process.


(a) Lack of enforcement mechanism

It is unclear on how the breach of the guidelines by any member of the CoC would be addressed. The well-known latin maxim ubi jus, ibi remedium encapsulates the dilemma, which essentially means that where there is a right, there is a remedy. In other words, it postulates that where the law has established a right there should be a corresponding remedy for its breach.


In a situation, if any member of the Committee of breaches any of the guidelines, it is unclear that what would be the impact of such breach. In other words, the grey area is whether such breach will just impact that particular member of the CoC or the CoC (and the resolution process) as a whole.


The same is to be kept in juxtaposition with one of the primary objectives behind the present amendment, which is a speedy and timely conduct of the resolution process. If the breach of the guidelines results in more judicial intervention and justiciability, then the model timelines in the conduct of a CIRP may become more difficult to achieve.


It must also be noted that the CoC has been given a long rope by the judicial authorities, so much so that even when the CoC entertains late bids,[10] or approves a resolution plan while being aware of the fact that the workers were seeking for the revival of certain production units of the debtor but the plan itself stipulates the closure of these units; in such instances the judicial authorities had held that the adjudicating authority would still have to go by the commercial wisdom of Committee of Creditors.[11]


Therefore, the Board would have to work out these aspects in consultation with the stakeholders before issuing any guidelines and the accompanying mechanism for its enforcement.


(b) Vague and open-ended provisions.

A provision must not be so vague, and overbroad that no reasonable standards are laid down and no clear guidance could be gauged.


The Supreme Court in Shreya Singhal v. Union of India,[12] applied the doctrines of vagueness, overbreadth, and chilling effect to strike down Section 66-A of the IT Act, reasoning that the impugned provision of Section 66-A “is cast so widely that virtually any opinion on any subject would be covered by it, as any serious opinion dissenting with the mores of the day would be caught within its net. Such is the reach of the section and if it is to withstand the test of constitutionality, the chilling effect on free speech would be total … therefore, [it would] have to be struck down on the ground of overbreadth”.


The proposed Code of Conduct in the discussion paper contains some very vague and open-ended obligations for the members of the CoC. For instance, it requires the CoC (i) to cooperate with the insolvency professional in discharging his duties under the Code; or (ii) maintain objectivity in exercising decisions on the subject-matter bestowed to the Committee under the Code; or (iii) ensure that decisions are made without any bias, favour, fear, coercion, undue influence or conflict of interest; or (iv) bear the collective interest of all stakeholders in mind in all activities and decision-making.


Such generic provisions may become a cause for major concern, where the conflict between the commercial wisdom of the CoC with these guidelines could give rise to challenges against an approved resolution plan. Currently, there are instances where objections have been raised against the approved resolution plan on the grounds that


(a) the approved plan had reserved a portion of the assets of the corporate debtor (in the present case, the same were the preference shares held by subsidiary of the corporate debtor) for distribution amongst the financial creditors alone;[13] or

(b) while the CoC had persuaded the successful resolution applicant to increase the worth of the resolution plan to the extent of Rs 235.86 crores (from the previous amount of Rs 217.98 crores) but in the process, it had allowed the portion of the claim payable to the operational creditors to be reduced from Rs 1.64 crores to Rs 0.50 crores.[14]


In such instances, the courts have at the altar of commercial wisdom of the CoC and quantitative; still refused to intervene.


The past experience tells us that most of the unsuccessful resolution applicants challenge the validity of the CIRP on one ground or the other. Thus, if a guideline with such broad obligations is issued by the IBBI, then it will provide the unsuccessful resolution applicants, or even other creditors with additional causes of action for challenging the approved resolution plans. The biggest concern with respect to this is that it will cause further delay in the completion of CIRP, in turn causing further deterioration of the value of assets of the corporate debtors.


(c)The limited opportunities to revise plans

In a scenario post COVID, successful resolution applicants may not be financially as sound as they used to, the limit on the applicants in modifying the plans. Furthermore, the amendment disallows the CoC from considering resolution plans that are received after a certain time. There are instances, where late bids have been considered,[15] and even approved[16] by the CoC in the interests of maximising the assets of the corporate debtor, which has even been upheld by the Supreme Court.


It remains to be seen on whether the same will be directory or mandatory.


The amendments certainly are based out of the pressing need to address the loopholes in a resolution process and learn from the avoidable experiences borne during these many years of the operation of the IB Code. However, despite the well-intended objective of checking the arbitrary powers of the CoC and promote a quicker resolution mechanism, the guidelines may require certain tailoring and at certain places, an enforceable mechanism.



† Akaant Kumar Mittal is an advocate at the Constitutional Courts, and National Company Law Tribunal, Delhi and Chandigarh. He is also a visiting faculty at the National Law University, Mumbai and the author of the commentary Insolvency and Bankruptcy Code – Law and Practice.

The author gratefully acknowledges the research and assistance of Sh Mahesh Kumar, 4th Year, BA LLB (Hons.), student at Sharda University, Greater Noida, Uttar Pradesh; Ms Jyotshna Yashaswi and Prince Chandak in writing this article.

[1] Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021, Notification No. IBBI/2021-22/GN/REG078, dated 30-9-2021 (w.e.f. 30-09-2021) Read HERE.

[2] Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021, S. 2, HERE.

[3] Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021, S. 5, HERE.

[4] Id., Regn. 17(1-A).

[5] Insolvency and Bankruptcy Board of India Discussion paper published on 27-8-2021, accessible HERE.

[6] Id., Annexure.

[7] 32nd Report of the Parliamentary Standing Committee on Finance in 17th Lok Sabha, titled “Implementation of Insolvency and Bankruptcy Code – Pitfalls and Solutions”, published in August 2021, Part II, para 3, accessible HERE .

[8] Ngaitlang Dhar v. Panna Pragati Infrastructure (P) Ltd., 2021 SCC OnLine SC 1276.

[9]  See K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222; Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17; Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531 : 2019 SCC OnLine SC 1478.

[10] See Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401.

[11] Santosh Wasantrao Walokar v. Vijay Kumar V. Iyer,  2020 SCC OnLine NCLAT 128.

[12] (2015) 5 SCC 1.

[13] Pratap Technocrats (P) Ltd. v. Monitoring Committee of Reliance Infratel Ltd., (2021) 10 SCC 623 : 2021 SCC OnLine SC 569.

[14] Power2SME (P) Ltd. v. Allied Strips Ltd., 2020 SCC OnLine NCLAT 1056.

[15] See IMR Metallurgical Resources AG v. Ferro Alloys Corpn. Ltd., (2020) 220 Comp Cas 528.

[16] See Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401.

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