Ibbi norms for CoC need monitoring mechanism

The recently announced guidelines issued by the Insolvency and Bankruptcy Board of India (IBBI) for the Committee of Creditors (CoC) are a step in the right direction but IBC experts believe it would not be effective unless there is a monitoring mechanism in place.

- RUCHIKA CHITRAVANSHI

"There are no obligations for the CoC (in these guidelines). They have not been issued under any law and are self-regulatory in nature. When the idea was conceptualised for the first time, IBBI was at least trying to get the Reserve Bank of India (RBI) on board," a senior IBC expert said.

Earlier this month, the insolvency regulator issued guidelines for the CoC that steer the insolvency resolution to stem the value erosion that occurs due to delay in procedures and bring more transparency.

The self-regulating guidelines require the CoC to maintain integrity, confidentiality, objectivity during decision-making and disclose conflict of interest. In February 2024, the Delhi High Court in Kunwer Sachdev versus IDBI Bank matter noted that the value of the corporate debtor, initially estimated at 300 crore was reduced to the point where the respondents received only 10 crore from the company's sale.