IBBI Proposes Major Reforms to Enhance Transparency and Safeguards in CIRP: A Deep Dive

The Insolvency and Bankruptcy Board of India (IBBI) released a significant Discussion Paper on November 17, 2025, aimed at addressing practical gaps and strengthening the integrity of the Corporate Insolvency Resolution Process (CIRP). The proposals focus on increasing transparency, protecting real estate allottees, and ensuring accountability in decision-making within the Committee of Creditors (CoC).

There is a detailed breakdown of the four key proposals introduced by the IBBI.

1. Protection for Real Estate Allottees: Mandatory Inclusion in IM and Resolution Plans

The Problem:

Currently, many real estate allottees fail to file formal claims within the prescribed timelines. Consequently, they are often excluded from the Information Memorandum (IM) and the Resolution Plan. This exclusion leads to post-approval litigation and uncertainty when these homebuyers eventually approach the successful resolution applicant.

The Proposal:

The IBBI proposes to amend Regulation 36(2) and insert Regulation 38A to mandate that:

• The Information Memorandum must include details of all allottees (names, amounts due, units allotted) as reflected in the corporate debtor's books of accounts, regardless of whether they have filed a formal claim.
• The Resolution Plan must strictly provide for the treatment of such non-filing allottees.

This move aligns with the NCLAT's observation in Puneet Kaur vs. K V Developers, ensuring equity for genuine homebuyers who may have missed procedural deadlines.

2. Enhanced Disclosures in Information Memorandum (IM)

The Problem:

There is a noted information asymmetry where IMs often fail to reflect the true financial position of the Corporate Debtor (CD). Critical assets like receivables, Joint Development Agreements (JDAs), and attached assets are frequently omitted or inadequately disclosed, leading to sub-optimal valuations and lower recovery for stakeholders.

The Proposal:

To ensure bidders can make informed assessments, the IBBI proposes strict mandates for the IM to include:

• Receivables: Comprehensive details of trade, inter-corporate, and contract receivables.
• JDAs: Full disclosure of Joint Development Agreements and similar collaboration rights, recognizing "development rights" as assets as per the Supreme Court's ruling in Victory Iron Works Ltd.
• Attached Assets: Specifics of assets under attachment by agencies like the ED or Income Tax Department, including the status of proceedings.

3. Checks and Balances for "Single Creditor" CoCs

The Problem:

In certain CIRPs, the Committee of Creditors (CoC) lacks any regulated financial institution. Instead, a single unregulated financial creditor may hold over 66% voting share, effectively controlling the entire process without the rigour and discipline usually associated with institutional lenders.

The Proposal:

To safeguard decision-making integrity, a new Regulation 16E is proposed. In cases where no financial institution is present and a single unregulated creditor holds >66% voting share:

• The Resolution Professional (RP) must invite the five largest operational creditors (by claim value) to attend CoC meetings as observers10.
• These observers will receive notices and minutes but will not have voting rights.
• Decisions taken by such CoCs must be recorded with detailed reasons.

4. Mandatory Reasoning for Liquidation Recommendations

The Problem:

The Board has observed instances where CoCs recommend liquidation even when receiving viable, compliant resolution plans that offer higher value than the liquidation value. Often, the rationale for choosing liquidation over resolution is not recorded, raising questions about accountability13.

The Proposal:

An amendment to Regulation 40D is proposed, requiring that if a CoC recommends liquidation despite receiving a plan higher than the liquidation value:

• The reasons for this recommendation must be mandatorily recorded in the meeting minutes.
• These reasons must be submitted to the Adjudicating Authority along with the liquidation application.

Conclusion and Timeline

These proposals represent a proactive step by the IBBI to curb procedural discretion and enhance the "realisable value" for stakeholders.

The IBBI has invited public comments on these proposals electronically.

Note: This article is based on the IBBI Discussion Paper released on November 17, 2025.