IBBI Proposes to Make Monitoring Committees Mandatory

The Insolvency & Bankruptcy Board of India (IBBI) has sought comments on the proposed amendment to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2024, to make the constitution of a monitoring committee mandatory for the smooth implementation of the resolution plan.

Sub-regulation 38 had earlier been amended in February 2023 to provide the option to the Committee of Creditors (CoC) to constitute a monitoring committee if deemed necessary. However, in State Bank of India & Ors v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr. dated Nov 7, 2024, the Hon’ble Supreme Court made several key recommendations regarding the constitution and functioning of the monitoring committees. In line with the recommendations, the sub-regulation is sought to be amended to further strengthen the framework governing monitoring committees by making its constitution mandatory for implementation of all resolution plans.

The proposed framework empowers the CoC to take the final decision on the constitution, composition, and functioning period of the monitoring committee. The committee shall be chaired by either the resolution professional who handled the CIRP or another insolvency professional proposed by the CoC and consist of nominee(s) from the CoC and an equal number of nominee(s) from the successful resolution applicant. Flexibility is provided to exclude existing members in case of changes or include additional persons as deemed appropriate.

The committee shall be responsible for oversight of plan implementation, distribution of proceeds, ensuring statutory compliance, and facilitating smooth transfer of assets and control. It shall be required to submit quarterly progress reports to the adjudicating authority and the board regarding the implementation status.

Comments may be submitted by December 9, 2024, on the IBBI website.