The Insolvency and Bankruptcy Board of India (IBBI) has proposed sweeping changes to the corporate liquidation process under the Insolvency and Bankruptcy Code (IBC) to curb potential collusion, enhance transparency and expedite proceedings.

The IBBI has made discussions with the stakeholders consultation committee (SCC) mandatory if a liquidator rejects the highest bid above the reserve price.

To deter frivolous bids in auctions, participants must self-declare their eligibility under Section 29A of IBC through affidavits.

Liquidators would have three days to verify the declarations post auction. Any bidder found ineligible would forfeit their earnest money deposit (EMD).

The discussion paper has proposed the IBBI should be allowed to manage the corporate liquidation account (CLA) directly, bypassing the present requirement to operate it within the Public Accounts of India.

“Direct management of CLA by the IBBI will consolidate unclaimed funds, enhance operational efficiency and reduce delays,” the paper stated.

The IBBI also addressed voluntary liquidation. It has proposed the process could continue even if uncalled capital remains, provided two-thirds of creditors consent. “Allowing liquidation despite uncalled capital prevents unnecessary delays while safeguarding creditor rights,” the regulator said.

“The mandatory monitoring committee (MC or the stakeholder consultation committee) will streamline plan implementation, improve documentation and compliance and ensure smoother handovers,” Yogendra Aldak, partner at Lakshmikumaran & Sridharan, said.

The balanced representation of stakeholders will foster better co-ordination in reviving distressed companies.

Piyush Agrawal, partner at Aquilaw, emphasised the importance of time-bound resolutions. “The amendments prioritise structured implementation of resolution plans, ensuring that fewer companies move to liquidation and assets retain their value.”

Rahul Sundaram, partner at IndiaLaw LLP, welcomed the formalisation of monitoring committees. “These committees, while previously used in practice, will now be standardised, enhancing accountability and transparency,” he said.

Manmeet Kaur, partner at Karanjawala & Co, said “including stakeholders from both creditors and resolution applicants ensures co-operation and alignment of interests, ultimately leading to better outcomes”.

Durgesh Khanapurkar, partner at Desai and Diwanji, cautioned against excessive independence for monitoring committees. “Independence may lead to high-handedness. Safeguards must allow stakeholders to approach the NCLT if the monitoring committee delays implementation,” he said.

Stakeholders have time till December 9 to submit their proposals.