Insolvency and Bankruptcy Board of India to finalise the code of conduct or guidelines preferably in three months for the effective functioning of the committee of creditors (CoC).
The finalisation of the guidelines should be done without diluting the sanctity of the «commercial wisdom» of the committee of creditors and the legislative intent of Insolvency and Bankruptcy Code, 2016, it observed.
Expressing displeasure over how the board hasn’t yet framed the guidelines, Justice Purushaindra Kumar Kaurav noted that the board had notified a discussion paper in 2021 on various issues, including the code of conduct for the CoC.
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Comments were invited on that discussion paper and the insolvency board was still in the process of framing guidelines, the judgment said. However, till date, no code of conduct or guidelines have been framed by IBBI for the effective functioning of the committee of creditors.
«The need for a code of conduct assumes greater importance in light of the fact that once a decision is taken by the CoC, the aggrieved party is deprived of the legal remedies, except to a limited extent,» the judge said.
Therefore, what attains significance is that the decision-making process should itself be infused with sufficient safeguards of reasonableness, fair-play, proportionality and adherence to the principles of natural justice, he added.
Considering the significant role which the CoC plays in the entire CIRP and the sanctity of the its “commercial wisdom” which is protected by the legislative mandate from