Insights from the Ground Reality of CIRP Implementation
Under the Insolvency and Bankruptcy Code (IBC), we speak often about the Committee of Creditors (CoC), resolution applicants, timelines, and valuations. But one stage remains surprisingly under-discussed — the Monitoring Committee (MC), which becomes responsible for steering the corporate debtor after NCLT approves the resolution plan.
In reality, the success or failure of a resolution plan often depends far less on the CoC negotiations and far more on how effectively the Monitoring Committee functions after plan approval. Yet MCs remain one of the weakest links in the entire insolvency ecosystem.
Here’s why Monitoring Committees struggle — and how we can strengthen them.
Why Monitoring Committees Often Fail
Lack of a defined legal framework
The IBC and CIRP Regulations do not specify:
- How the MC should be structured
- What powers it should have
- How decisions should be made
- Who holds authority for signing contracts or approving budgets
This lack of statutory clarity leaves every resolution plan to reinvent the structure, resulting in inconsistent, vague, and often ineffective MCs.
Conflicting interests and internal friction
MCs typically include:
- Resolution Professional
- Resolution Applicant / Investor
- Financial creditors
- Homebuyer representatives (in real estate)
- Directors of the corporate debtor
- The Project Management Consultant (PMC)
Each party comes with different priorities. Homebuyers want transparency, lenders want control, RAs want speed, and PMCs want clarity. These divergent interests frequently lead to stalemates, delays, and finger-pointing.
No real decision-making authority
Many MCs function merely as “monitoring bodies” with no power to:
- Approve budgets
- Release payments
- Enter into contracts
- Finalize vendor appointments
- Mobilize construction teams
Without operational authority, the MC is reduced to a discussion forum instead of an execution body. This leads to weeks or months of avoidable delays.
Ambiguity around the RP’s role
Most plans say the RP will “chair” or “supervise” the MC, but rarely define:
- Whether the RP has a casting vote
- Whether the RP can sign on behalf of the MC
- Whether the RP is liable for operational decisions
- Whether the RP only monitors or also executes
This ambiguity creates significant compliance and legal risk for the RP and causes uncertainty for other stakeholders.
Weak or unclear project management systems
In real estate CIRPs especially, MCs often lack:
- A capable PMC with technical authority
- Clear scope of work
- Milestone-based monitoring
- Documented workflows
As a result, there is poor coordination between architects, contractors, engineers, and the MC — slowing down implementation.
Lost momentum between CoC approval and NCLT approval
This phase often extends for months.
During this time:
- MC is not fully active
- RA cannot implement the plan
- RP cannot begin construction or sign contracts
- Permissions and prices expire
By the time the MC starts acting, the project is already delayed.
How We Can Strengthen Monitoring Committees
Build clarity directly into the Resolution Plan
The plan must state:
- Composition of the MC
- Roles and responsibilities
- Voting mechanism
- Signing authority
- Quorum and meeting frequency
- Funding responsibilities
- Dispute-resolution mechanism
Well-drafted MC clauses prevent future conflicts.
Provide the MC with actual operational powers
For effective implementation, MCs must have defined authority to:
- Approve budgets
- Sanction contracts
- Certify milestones
- Release payments as per defined protocols
A powerless MC cannot drive revival.
Appoint a capable Project Management Consultant
A strong PMC ensures:
- Technical supervision
- Vendor management
- Cost control
- RERA compliance
- Timely execution
For real estate CIRPs, this is non-negotiable.
Establish a clear fund flow mechanism
An escrow account with defined approval matrices creates transparency and eliminates disputes.
Begin preparatory MC meetings before NCLT approval
Legally, implementation begins only after Section 31 approval.
But planning — vendor identification, budgeting, sequencing — can start earlier to ensure momentum.
Conclusion: MCs Can Make or Break a Resolution Plan
Monitoring Committees are the bridge between insolvency and revival.
When they are well-structured, empowered, and aligned, resolution plans succeed. When they are weak or unclear, projects delay, stakeholders clash, and value erodes.
As India prepares for broader reforms under the upcoming IBC Amendment Bill, 2025, strengthening Monitoring Committees should be a priority for practitioners, policymakers, and resolution applicants.
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Author Note: The author is an Insolvency Resolution Professional with extensive experience in managing multiple CIRP and liquidation assignments. For queries or professional discussions related to the Insolvency and Bankruptcy Code (IBC), you may reach out to: Krit Narayan Mishra at kritmassociates@gmail.com | +91 99108 59116.
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