CIRP Regulations, 2016: Strengthening CoC Oversight & Procedural Clarity – A Practitioner’s Analysis

The Insolvency and Bankruptcy Board of India (“IBBI”) released a Discussion Paper on 16th February 2026, proposing amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”), with a stated objective of strengthening creditor oversight, improving procedural discipline, and reinforcing value maximisation under the Insolvency and Bankruptcy Code, 2016 (“IBC” or “the Code”). The last date for submission of public comments is 10th March 2026.

The paper proposes four targeted amendments addressing: (i) strengthening recording of CoC deliberations while approving resolution plans; (ii) rationalisation of the framework for approval of CIRP costs and going concern decision-making; (iii) clarification of the role of the CoC in respect of delayed claims; and (iv) exclusion of related operational creditors from CoC constituted exclusively of operational creditors.

This article offers a practitioner’s critical analysis of each proposal, identifies implementation challenges, and proposes additional legislative and regulatory measures for IBBI’s consideration.

IBBI Discussion Paper (February 2026)

Strengthening CoC Oversight and Procedural Clarity Under CIRP Regulations, 2016:

A Practitioner’s Critical Analysis

February 2026

I. Introduction

The Insolvency and Bankruptcy Board of India (“IBBI”) released a Discussion Paper on 16th February 2026, proposing amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”), with a stated objective of strengthening creditor oversight, improving procedural discipline, and reinforcing value maximisation under the Insolvency and Bankruptcy Code, 2016 (“IBC” or “the Code”). The last date for submission of public comments is 10th March 2026.

The paper proposes four targeted amendments addressing: (i) strengthening recording of CoC deliberations while approving resolution plans; (ii) rationalisation of the framework for approval of CIRP costs and going concern decision-making; (iii) clarification of the role of the CoC in respect of delayed claims; and (iv) exclusion of related operational creditors from CoC constituted exclusively of operational creditors.

This article offers a practitioner’s critical analysis of each proposal, identifies implementation challenges, and proposes additional legislative and regulatory measures for IBBI’s consideration.

II. Proposal 1 — Strengthening Recording of CoC Deliberations While Approving Resolution Plans

A. The Regulatory Gap

The existing Regulation 39(3)(b) requires the CoC to record its deliberations on the feasibility and viability of resolution plans. However, the regulations do not prescribe the specific aspects that must form part of such recorded deliberations. This has resulted in considerable variation in the depth and quality of CoC minutes across CIRPs — creating situations where the basis of the CoC’s commercial decision is not discernible from the record, even if the decision itself enjoys protection under the doctrine of commercial wisdom established by the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. [(2020) 8 SCC 531].

B. What is Proposed

IBBI proposes to amend Regulation 39(3)(b) to mandate recording of CoC deliberations on four specific aspects:

• Feasibility and viability of each resolution plan (existing requirement)
• Expected recovery for creditors compared to fair value and liquidation value under Regulation 35
• Adequacy of market discovery, including use of challenge mechanism or re-invitation of plans
• Capability, credibility, and implementation certainty of the resolution applicant, including availability of funds

C. Practitioner’s Assessment

This proposal is a positive and overdue step. The author particularly appreciates its significance in the context of single-member CoC situations — a scenario increasingly common where the sole financial creditor is a bank or NBFC. In such cases, the commercial wisdom doctrine can operate as a shield for decisions that are self-serving: maximising that one creditor’s recovery while being indifferent to operational creditors, employees, and the broader ecosystem of the corporate debtor. The mandatory recording of recovery vis-a-vis fair value and liquidation value creates a paper trail that the Adjudicating Authority can meaningfully examine.

IBBI has been careful to clarify that this is not a new evaluation criterion — it merely ensures that what the CoC is already expected to consider is demonstrably reflected in the record. This is both legally sound and administratively proportionate.

D. Additional Suggestion

The author recommends that IBBI consider a further addition to the recording requirements: the CoC should also record its deliberations on how the approved resolution plan addresses the root cause of the corporate debtor’s insolvency. The IBC’s stated objective is not merely creditor recovery but the resolution of a viable, sustainable enterprise going forward. If the root cause of insolvency was, for instance, over-leveraging, and the plan merely haircuts debt without restructuring the capital base, the corporate debtor may be heading back toward insolvency within years.

Requiring the CoC to record its assessment of whether the plan addresses the root cause would: (i) introduce a forward-looking sustainability lens into deliberations; (ii) strengthen the NCLT’s ability to assess whether approval meets the just and equitable standard under Section 31; and (iii) align with Section 30(2), which already requires the RP to confirm that the plan does not contravene applicable law.

IBBI may anticipate that root cause analysis is already implicit in feasibility and viability assessment. The author’s response is that this is precisely the philosophy of the present proposal — making the implicit explicit, and ensuring that sound practice is codified rather than assumed

III. Proposal 2 — Rationalisation of CIRP Costs Framework and Going Concern Decision-Making

A. The Problem in Context

Two interlinked issues are identified by IBBI. First, the pre-CoC cost gap: the IRP must act from Day 1 of insolvency commencement but the CoC can only be constituted and hold its first meeting after 30 days. Second, the going concern as default: Sections 20 and 25 of the Code require the IRP/RP to manage the CD as a going concern, but this has in practice been treated as a mechanical, unconditional mandate — leading to avoidable cash burn and erosion of enterprise value.

B. What is Proposed — The Three-Tier Framework

IBBI proposes a calibrated three-tier framework:

• Tier 1 (Day 1 to Day 30 or CoC constitution, whichever earlier): IRP may incur limited costs without prior approval, confined to asset preservation, essential services, statutory compliance, and minimal operations to prevent value deterioration. All such costs are to be placed for post-facto approval at the first CoC meeting.
• Tier 2 (First CoC meeting): The RP places a Going Concern Assessment Report covering estimated income, expenditure and cash flows, working capital requirements, and risks of value erosion from continuation or suspension of operations. Based on this, the CoC takes a conscious commercial decision on continuation.
• Tier 3 (Post first meeting): All CIRP costs require prior CoC approval at each meeting, with periodic estimates and actual-versus-estimate comparison statements.

C. Practitioner’s Assessment — Operational Realities

While this proposal represents a significant and important regulatory improvement, the author respectfully submits that certain provisions need recalibration to account for ground-level operational realities that IBBI’s framework may not fully appreciate.

The first 30 days of a CIRP are arguably the most demanding phase of an insolvency professional’s engagement. Simultaneously, the IRP is: taking custody of assets; making public announcements; issuing Form B; collecting information from a management that may be hostile, uncooperative, or in denial; constituting the CoC; and engaging with the Adjudicating Authority. In many cases, books of accounts are unavailable, management cooperation is absent or delayed, and records may be incomplete or tampered with.

In this context, requiring the IRP to place a meaningful Going Concern Assessment Report at the very first CoC meeting — which itself must be held within 30 days — is ambitious at best and unrealistic in contested or records-starved situations.

D. Recommended Modifications

(i) Preliminary Assessment at First Meeting, Detailed Assessment on CoC Direction

The author recommends that the regulation be modified to require a preliminary Going Concern Assessment at the first CoC meeting — covering only what is reasonably ascertainable within the first 30 days: broad operational status, immediate cash requirements, and evident risks. The CoC should then be empowered to direct, based on the complexity and nature of the CD’s business, the timeline by which a detailed Going Concern Assessment Report shall be placed — whether at the second or a subsequent meeting as the CoC may direct.

This formulation is superior for several reasons: it acknowledges that different CDs have vastly different complexity levels; it vests the timing decision with the CoC, consistent with its role as commercial decision-maker; and it avoids a rigid regulatory timeline that could become a compliance checkbox rather than a meaningful exercise. The author suggests the following proviso:

“Provided that where the insolvency professional is unable to place a complete Going Concern Assessment Report at the first meeting due to non-availability of records or management cooperation, a preliminary assessment shall be placed at the first meeting and the detailed report shall be placed at such subsequent meeting as the committee may direct, with reasons for the delay recorded in the minutes.”

(ii) Statutory Compliance Costs Must Be Non-Discretionary CIRP Costs

The author strongly advocates that statutory compliance costs — GST returns, PF/ESIC contributions, TDS filings, ROC compliances, labour law requirements — must be expressly carved out of the CoC’s approval framework and treated as automatically approved CIRP costs. These are not commercial decisions; they are legal obligations that continue irrespective of CIRP commencement.

The existing inclusion of statutory compliance within the Tier 1 permitted costs is welcome, but the framework must go further: the CoC must have no discretion to withhold ratification of statutory compliance costs incurred by the IRP. The petitioning creditor — whether financial or operational — whose action placed the IRP in that position without CoC oversight should bear these initial costs. Giving the CoC a veto over statutory compliance costs effectively empowers creditors to expose the IRP to regulatory and criminal liability, which is untenable and contrary to the rule of law.

This position is consistent with the IBC’s own scheme: Section 5(13) of the Code defines insolvency resolution process costs to include amounts due to government, indicating that the legislature never intended statutory dues to be subject to creditor veto.

IV. Proposal 3 — Clarification of the Role of CoC in Respect of Delayed Claims

A. The Mischief

Regulation 13(1C)(b) requires the RP to place delayed claims — received after the Regulation 12 period but before voting on the resolution plan or initiation of liquidation — before both the CoC and the Adjudicating Authority. A problematic practice has emerged whereby only those delayed claims which receive a CoC recommendation are placed before the NCLT. Claims where the CoC withholds recommendation never reach the Adjudicating Authority, effectively denying genuine creditors their legal remedy.

This practice is legally incorrect. Condonation of delay and adjudication of claims vest exclusively with the Adjudicating Authority, not the CoC. The CoC’s role is confined to commercial aspects of the resolution process — specifically, how an admitted delayed claim should be treated in the resolution plan.

B. Motivated Gatekeeping — A Real and Serious Concern

The author, from practice, identifies several factual scenarios that motivate CoCs to act as gatekeepers for delayed claims, each more troubling than a mere procedural inefficiency:

• A bank or NBFC that holds CoC membership may have prior litigation history or a fractious relationship with a delayed claimant — and may use the CoC position to deny that claimant’s claim reaching the NCLT, effectively settling old scores through the insolvency process.
• Where the suspended board of the CD is itself a potential resolution applicant (which the Code permits unless they are disqualified under Section 29A), the CoC may act under the suspended board’s influence to suppress claims that would either dilute voting share percentages or complicate plan approval dynamics.
• Suppressing certain creditor claims keeps the existing CoC members’ voting share higher, directly influencing the 66% threshold for plan approval — creating an arithmetic incentive for gatekeeping that is independent of any malice.

These scenarios reinforce why the proposed amendment’s approach — removing CoC gatekeeping power entirely — is philosophically and structurally correct.

C. Concerns Regarding the One-Week Rolling Timeline

While the proposal is sound in principle, the author submits that the proposed one-week rolling filing timeline for delayed claims before the Adjudicating Authority creates a serious practical problem that threatens to undermine the very institutional efficiency the IBC seeks to promote.

Under the current framework, the outer limit for delayed claims is the later of: the date of issue of the Request for Resolution Plans (RFRP) under Regulation 36B, or 90 days from the insolvency commencement date. In a hypothetical CIRP where both coincide at Day 90, the delayed claims window runs from Day 31 to Day 90 — a 60-day period. Under the proposed one-week rolling rule, this generates potentially 8 to 9 separate NCLT applications per CIRP solely for delayed claims.

Multiplied across the several hundred active CIRPs across all NCLT benches — benches that simultaneously handle Companies Act matters, other IBC disputes, and are operating under well-documented constraints of judicial strength and support infrastructure — this creates an unsustainable addition to an already overburdened docket. The noble intent of the proposal risks being defeated by the very institutional congestion it will generate.

D. Recommended Alternative — Consolidated Filing at Outer Deadline

The author recommends replacing the one-week rolling timeline with a requirement for a single consolidated application before the Adjudicating Authority, to be filed within one week of the last date prescribed for receipt of delayed claims, or within one week of the date of issue of RFRP under Regulation 36B, whichever is earlier. This achieves the proposal’s intent — ensuring all acceptable delayed claims reach the AA — while being respectful of NCLT’s institutional capacity.

E. Additional Suggestions on Plan Voting and Delayed Claims

(i) Suspension of Plan Voting Until NCLT Decides on Delayed Claims

The author further recommends that plan voting by the CoC should be suspended until the Adjudicating Authority has decided on all consolidated delayed claim applications. The creditor matrix is incomplete until delayed claims are adjudicated — an undecided delayed claim can materially alter total admitted debt quantum, voting share percentages, and the adequacy of the plan’s distribution waterfall. This suspension would also create a salutary incentive for the NCLT to expedite its decision on delayed claims applications.

(ii) Contingency Clauses in Resolution Plans

As an alternative, where operational exigencies require proceeding to plan voting, resolution applicants should be required to include a contingency clause in their plans specifying how admitted delayed claims will be treated if the NCLT allows them post-plan approval. Such contingency treatment must provide for no less favourable treatment than similarly placed creditors received. Additionally, the delayed claimant, upon admission of their claim by the NCLT, should have a limited right to be heard before the AA at the Section 31 plan approval stage — not to reopen CoC voting, but to ensure that the contingency treatment is just and equitable.

The author acknowledges that delayed claimants who did not participate in CoC voting cannot expect the same procedural rights as timely creditors. The one-year vintage suggestion (discussed under Proposal 4 legislative recommendations below) further reinforces the discipline that creditors must exercise in lodging claims promptly. However, this discipline does not justify leaving delayed claimants entirely without recourse.

V. Proposal 4 — Exclusion of Related Operational Creditors from CoC Constituted Exclusively of Operational Creditors

A. The Regulatory Gap

Regulation 16 provides for CoC constitution where the CD has no financial debt or all financial creditors are related parties. In such cases, the CoC comprises the 18 largest operational creditors by value, along with workmen and employee representatives. Currently, Regulation 16 does not exclude related operational creditors from this CoC. This enables promoters to exercise backdoor influence through related-party OC entities — group companies, vendor entities, or supply chain companies under their control — whose outstanding dues qualify them for CoC membership.

IBBI proposes a simple amendment: inserting the word “unrelated” before “operational creditors” in Regulation 16(2)(a), mirroring Section 21’s exclusion of related financial creditors.

B. The Constitutional Validity Concern — A Fundamental Objection

The author respectfully submits that IBBI may lack the regulation-making power to implement Proposal 4 as proposed, without a prior amendment to the parent statute.

Section 21 of the IBC expressly excludes related financial creditors from CoC membership — but is conspicuously silent on related operational creditors. This silence is not accidental; it reflects Parliament’s deliberate legislative choice regarding CoC composition. IBBI’s regulation-making power under Section 240 of the Code is subordinate to the Code itself — regulations cannot travel beyond what the parent statute permits or implies.

A regulation purporting to exclude related OCs from a Regulation 16 CoC would arguably: (i) travel beyond the parent provision; (ii) effectively amend Section 21 through subordinate legislation, which is constitutionally impermissible; and (iii) be susceptible to challenge before the NCLT, NCLAT, or High Courts as ultra vires the Code.

The author therefore respectfully recommends that IBBI formally advise the Ministry of Corporate Affairs to first amend Section 21 of the IBC to expressly extend the related party exclusion to OC-only CoCs constituted under Regulation 16. Only upon such legislative amendment can IBBI’s proposed regulatory change rest on constitutionally firm ground.

C. The Edge Case — All Operational Creditors Are Related

The proposal also raises an unaddressed edge case: what if all operational creditors of significant value are related parties of the CD? The proposed CoC would then consist only of workmen and employee representatives. This scenario, while exceptional given India’s corporate ecosystem, is not impossible — particularly in tightly-held group structures. The legislative amendment recommended above should also provide for this contingency.

VI. Additional Legislative Recommendations — A Coordinated IBC Amendment Package

The analysis above reveals that two of IBBI’s proposals require legislative action beyond IBBI’s regulation-making powers. The author recommends that IBBI formally advise the MCA to initiate a coordinated, single amendment to three provisions of the IBC:

Section 21 — Extension of Related Party Exclusion to OC-Only CoCs

Amend Section 21 to expressly extend the related party exclusion to operational creditors participating in CoCs constituted exclusively under Regulation 16. This provides the legislative foundation for IBBI’s Proposal 4 to follow through regulation.

Section 8 — Minimum Vintage Requirement for Demand Notices by Operational Creditors

A recurring mischief — not addressed in this Discussion Paper but warranting urgent attention — is the creation of artificial operational creditors by the CD’s own management to engineer a friendly CIRP. The mechanics are straightforward: management creates a related service provider entity, that entity raises invoices of Rs. 1 crore on the CD, a default is engineered, and CIRP is initiated with management effectively controlling the process from the outset.

The author recommends amending Section 8 to require that the operational debt underlying a demand notice must have been outstanding for at least one year and be of Rs. 1 crore or above before a valid Section 8 notice can be issued. This temporal filter at the demand notice stage makes manufactured defaults significantly harder to engineer.

Section 9 — Corresponding Eligibility Filter for OC-Initiated CIRP Applications

Section 9 should be correspondingly amended to incorporate the same one-year vintage and Rs. 1 crore threshold as eligibility conditions for OC-initiated CIRP applications, ensuring consistency between the demand notice stage and the application stage.

Savings Clause

The Sections 8 and 9 amendments should include a savings clause providing that the vintage requirement does not apply where the operational creditor can demonstrate to the AA’s satisfaction that the CD has committed fraud, wilful default, or has specifically acknowledged the debt in writing — ensuring genuine creditors are not prejudiced by the filter in exceptional circumstances.

The logic of bundling all three amendments into a single IBC amendment exercise is sound: all three share the common objective of preventing abuse of the IBC framework by related or manufactured creditors; a single amendment is administratively more efficient; and it avoids the risk of partial implementation.

 VII. Conclusion

The IBBI Discussion Paper of February 2026 represents a thoughtful and substantive attempt to address implementation challenges that have emerged through years of CIRP experience. The four proposals are directionally sound — they promote transparency, accountability, and creditor primacy while respecting the commercial wisdom of the CoC.

The author’s specific recommendations may be summarised as follows:

• Proposal 1: Support with the additional suggestion that CoC minutes also record deliberations on how the resolution plan addresses the root cause of the CD’s insolvency.
• Proposal 2: Support with modification — require only a preliminary Going Concern Assessment at the first meeting, with the detailed report at such subsequent meeting as the CoC may direct; and expressly exclude statutory compliance costs from CoC approval discretion.
• Proposal 3: Support the philosophical intent; recommend replacement of the one-week rolling timeline with a single consolidated filing; and add provisions for suspension of plan voting or contingency clauses in resolution plans as alternatives.
• Proposal 4: Flag the constitutional validity concern and recommend a prior Section 21 IBC amendment before the regulatory change is implemented.
• Legislative Package: Recommend a coordinated MCA amendment to Sections 21, 8, and 9 of the IBC to close the related and manufactured creditor loopholes comprehensively.

The author invites IBBI to consider these submissions in the spirit in which they are offered — as a practitioner’s contribution to building an insolvency ecosystem that is efficient, equitable, and constitutionally robust.

*****

Prakash K. Pandya, Advocate, Accredited Mediator & Insolvency Professional, Bombay High Court | IBBI Registered | Mumbai