IBBI’s August 2025 Discussion Paper: Tightening CIRP Integrity Through Transparency, Accountability and Tech

Introduction

Insolvency and Bankruptcy Code, 2016 was formed with the intent of consolidating and amending the laws in order to simplify the reorganization and insolvency resolution, to maximize the value of assets, to promote entrepreneurship and balance the interests of all the stakeholders.

Part II, Chapter II of the IBC, 2016 (Section 6 to 32A) deals with the provisions of CIRP (Corporate Insolvency Resolution Process), which is the core of the IBC and fulfills the legislative intent of the act. IBBI (Insolvency and Bankruptcy Board of India), which is the watchdog of IBC, is responsible for making regulations and guidelines on matters relating to insolvency. On 6th of August 2025, it issued certain regulatory proposals to bring procedural fairness, transparency, and confidentiality in the CIRP process.

Background: Where We Are and What’s Broken

The IBC has evolved through both legislative amendments and judicial interpretation. Sections 29A and 32A were landmark insertions:

• Section 29A: Prevents ineligible or conflicted parties from regaining control of distressed companies.
• Section 32A: Provides a “clean slate” to the corporate debtor (CD) after a legitimate change of hands.

Yet, enforcement has been patchy. There are inconsistencies in procedural practices and lack of oversight by COC (Committee of Creditors) over the ineligibility under Section 29A, and loopholes in ownership disclosures due to multilayered ownership structures, which often disregard the intent of Section 32A.

The IBBI’s proposals aim to close the gaps and create a robust CIRP mechanism to meet the needs of the modern world.

Proposal 1: Recording COC Deliberations on Section 29A Eligibility

IBBI (Insolvency Resolution Process for corporate persons) Regulation, 2016 lays down compliance regulations:

1. Regulation 38 – for conducting due diligence
2. Section 30 read with Regulation 39 – to submit an affidavit
3. Regulation 36A – for invitation of expression of interest

These regulations guide the Resolution Professional (RP) and Resolution Applicant (RA) regarding Section 29A, which talks about the eligibility criteria for the RA. However, there is no specific provision for COC in CIRP regulations to record its deliberations on the RA’s eligibility under Section 29A.

As stipulated in K. Sashidhar Vs. Indian Overseas Bank & Ors, the Supreme Court stressed the importance of respecting the commercial wisdom of COC in its commercial decisions. An express duty on this will enhance transparency and accountability in CIRP.

This proposal would deepen COC’s involvement in due diligence, minimize litigation risks over eligibility, and enhance transparency while ensuring fair and lawful participation, consistent with the intent of the code.

Proposal 2: Enhanced Disclosures on Beneficial Ownership under Section 32A

Section 32A of IBC, 2016 grants immunity to the corporate debtor (CD) and its property from prosecution for offences committed prior to commencement of the CIRP, provided the approved resolution plan effects a change in management or control in favour of a person who is not:

1. a promoter or in the management or control of the corporate debtor or a related party of such a person; or
2. a person against whom the relevant investigating authority has reason to believe involvement in the offence and has submitted or filed a report or complaint to the relevant statutory authority or Court.

Implementation may be hindered if Resolution Applicants use intricate holding companies to hide the true beneficial owners. Without proper disclosure, it is hard to identify who will actually benefit under Section 32A, which goes against the law’s intent. The “clean slate” benefit under the IBC should only apply if proper disclosures of holding arrangements of RA are strictly met.

In Manish Kumar v. Union of India, judicial intent emphasized creating safer grounds for RA’s investment in assets to strengthen CIRP provisions. Based on rulings of this case, these amendments must be made to the code.

Hence, it is proposed to amend Regulation 38 to mandate every Prospective Resolution Applicant (PRA) to file as part of the plan:

• A statement of beneficial ownership in a format specified by the Board, covering details of all natural persons who ultimately own or control the PRA, together with the shareholding structure and jurisdiction of each intermediate entity.
• An affidavit, in a format specified by the Board, stating that the PRA is eligible / not eligible for the benefit of Section 32A.

Proposal 3: Digital Platform for Resolution Plan Invitation and Submission

IBBI mandated the use of Baanknet (formerly eBKray) auction platform for conducting auctions for asset sales during liquidation processes after 1st April, 2025.

Following the success of this online platform, it presents a compelling case to extend similar technological solutions to other aspects of insolvency proceedings.

The 10th Report of the Standing Committee on Finance on ‘Demands for Grants (2025-2026) of the Ministry of Corporate Affairs (MCA)’ recommended that the MCA implement a direct submission system for resolution plans through a central online portal.

Supporting this, the IIIPI Study Group Report – ‘Developing Market for Stressed Assets in India,’ released in May 2025, noted: “Currently, eBkray portal caters to listing and e-Auctions under Liquidation process. However, to be more effective in removing information asymmetry during the resolution process, a preferred method would be for resolution proposals to also be listed on the eBkray portal.”

With successful platform use, parliamentary support, and expert backing, there’s a clear need to expand digitalization beyond liquidation. Digitalizing how resolution plans are received will improve fairness, transparency, and efficiency while keeping sensitive commercial information confidential.

As the insolvency regime matures, it becomes imperative to strengthen institutional safeguards, streamline compliance mechanisms, and adopt technology-driven reforms to uphold the integrity and efficiency of the resolution framework. The Committee of Creditors (CoC) is increasingly expected to play an active role in ensuring compliance with statutory mandates, including the ineligibility criteria under Section 29A, beneficial ownership disclosures, and the application of immunity under Section 32A.