Role of the Monitoring Committee After IBC Resolution Plan Approval
When the National Company Law Tribunal (NCLT) approves a resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, the Corporate Insolvency Resolution Process formally ends. But plan implementation can span months or years. To bridge this gap, resolution plans constitute a Monitoring Committee to oversee execution. Understanding what this body can and cannot do is critical for successful resolution applicants, financial creditors, and resolution professionals.
Regulatory Basis for the Monitoring Committee Under IBBI Regulations
The IBC does not expressly define or mandate a monitoring committee in the way it prescribes for the Committee of Creditors or the Resolution Professional. The authority for such committees flows from the approved resolution plan itself, read with Regulation 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Regulation 38(3) requires every resolution plan to specify the supervisory mechanism for its implementation, which in practice almost always takes the form of a monitoring committee.
The IBBI issued a Discussion Paper on Monitoring Committees under CIRP in 2022, acknowledging that the regulatory framework left several operational questions unanswered. Following stakeholder consultations, the IBBI has progressively clarified the scope of monitoring committee powers through circulars and model plan provisions.
Who Sits on the Monitoring Committee?
The composition of the monitoring committee varies across plans but typically includes: a representative of the successful resolution applicant; representatives of the CoC, particularly the lead financial creditor; the erstwhile Resolution Professional, who may continue as a member or observer; and in some cases, an NCLT-appointed observer or permanent invitee to ensure institutional oversight.
The resolution plan must specify the term of the monitoring committee, the quorum required for decisions, and the voting mechanism. Where the plan is silent on these points, disputes have regularly come before the NCLT, adding delay to implementation.
What Does the Monitoring Committee Actually Do?
Supervising Implementation
The monitoring committee's primary duty is to ensure that each milestone in the approved plan is met on schedule. This includes transfers of assets, payment of consideration to creditors, capital infusion by the resolution applicant, and satisfaction of conditions precedent to the change of management. The committee cannot alter these milestones; it can only report deviations and seek NCLT directions.
Statutory Compliance Oversight
During the transition from CIRP to the resolution applicant's management, the corporate debtor must maintain regulatory filings, pay statutory dues as provided in the plan, and comply with any regulatory approvals granted as part of the resolution. The monitoring committee ensures these obligations are discharged and updates the NCLT, financial creditors, and other creditors on a quarterly basis.
Reporting to the Adjudicating Authority
Periodic status reports to the NCLT form a key part of the monitoring committee's function. Where implementation is running behind schedule or the resolution applicant appears unable to fulfil obligations, the committee is expected to flag this promptly so the NCLT can take remedial action, including invoking the performance guarantee or, in extreme cases, considering liquidation.
Limits on Monitoring Committee Authority
A body of NCLAT jurisprudence has firmly settled that the monitoring committee is a creature of the approved resolution plan and cannot step beyond it. The NCLAT has held that a monitoring committee cannot modify the CoC-approved resolution plan or revisit creditor entitlements once the plan is approved under Section 31. The NCLT Bengaluru Bench ruled that a monitoring committee cannot claim fees beyond the ceiling fixed in the resolution plan, regardless of the work actually performed.
These rulings reflect a broader principle: once a plan attains finality under Section 31, neither the CoC, the RP, nor any committee constituted under the plan can reopen its commercial terms. The monitoring committee's role is limited to implementation, not renegotiation.
Performance Guarantee and Default Scenarios
Resolution plans typically require the resolution applicant to furnish a performance guarantee with the NCLT registry. If the applicant defaults on implementation, the monitoring committee reports the default to the NCLT, which may direct forfeiture of the performance guarantee and initiate action under Section 74(3) of the IBC. Section 74(3) makes it a criminal offence for a resolution applicant to contravene the terms of an approved resolution plan, punishable with imprisonment between one and five years and a fine between one lakh and one crore rupees.
Dissolution of the Monitoring Committee
Once the resolution plan is fully implemented, the monitoring committee is dissolved. This typically coincides with the resolution applicant completing all payments specified in the plan and assuming full management control of the corporate debtor. The NCLT then formally closes proceedings.
Where implementation drags past the plan timeline without an extension, the monitoring committee may approach the NCLT for directions. The NCLT retains supervisory jurisdiction over the corporate debtor until implementation is complete, even though the CIRP itself has concluded.
Frequently Asked Questions
Is the Monitoring Committee mandated by the IBC?
Not expressly. The obligation to specify a supervisory mechanism arises from Regulation 38(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. In practice, this is always fulfilled through a monitoring committee constituted under the resolution plan.
Can the monitoring committee approve changes to creditor payment terms after Section 31 approval?
No. The NCLAT has consistently held that once the NCLT approves a resolution plan under Section 31, the plan attains finality. The monitoring committee has no power to alter payment terms, distributions, or creditor entitlements.
Who can approach the NCLT if the resolution applicant fails to implement the plan?
The monitoring committee itself, as well as any creditor or the RP (where still in office), can file an application before the NCLT reporting non-implementation and seeking relief, including forfeiture of the performance guarantee.
Does the moratorium under Section 14 continue during monitoring committee supervision?
No. The moratorium under Section 14 ceases upon approval of the resolution plan under Section 31. The monitoring committee operates in a post-moratorium environment.
What happens if the monitoring committee is deadlocked?
A deadlocked monitoring committee can apply to the NCLT for directions. The NCLT has the power to give such directions as are necessary for proper implementation of the approved resolution plan.
Can the NCLT remove a member of the monitoring committee?
The NCLT, as the adjudicating authority retaining supervisory jurisdiction, can give directions regarding the conduct and composition of the monitoring committee to ensure effective implementation.
How long does the monitoring committee remain in place?
The monitoring committee continues until the resolution plan is fully implemented. The resolution plan must specify a timeline; if the applicant needs an extension, it must approach the NCLT with cogent reasons before the timeline expires.
Who typically chairs the Monitoring Committee after a resolution plan is approved?
The resolution plan itself specifies the chair, which is commonly a representative of the successful resolution applicant or, in some plans, the erstwhile Resolution Professional acting in a transitional capacity. There is no statutory requirement fixing who must chair the committee.
Can the Monitoring Committee be sued for decisions taken during plan implementation?
The committee acts within the authority granted by the approved resolution plan and functions under the National Company Law Tribunal's supervisory jurisdiction, so grievances about its conduct are ordinarily raised before the NCLT through an application rather than through separate civil proceedings against the committee itself.
Can financial creditors initiate a fresh insolvency process against the corporate debtor if the resolution applicant defaults during monitoring committee supervision?
A fresh application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is not the ordinary route for addressing default during plan implementation, since the corporate debtor is no longer in the moratorium period and the monitoring committee mechanism exists precisely to supervise this phase. The established remedy is for the monitoring committee or an affected creditor to report the default to the NCLT, which can direct forfeiture of the performance guarantee and consider action under Section 74(3) rather than restart the insolvency process from the beginning.
Does litigation pending against the corporate debtor at the time of plan approval continue during monitoring committee supervision?
Yes. Section 26 of the Insolvency and Bankruptcy Code, 2016 provides that the insolvency resolution process does not affect the right of any party to institute or continue pending legal proceedings, and this principle extends into the implementation phase once a plan is approved. Suits, avoidance applications under Sections 43 to 66, and other proceedings involving the corporate debtor generally continue to be pursued by whoever is authorised to do so under the approved plan, rather than lapsing on approval.
Is monitoring committee membership limited to representatives of financial creditors, or can operational creditors also participate?
The Committee of Creditors under Section 21 of the Insolvency and Bankruptcy Code, 2016 is composed of financial creditors, and monitoring committees are typically staffed by representatives drawn from that same body, particularly the lead financial creditor, since it is the CoC's approved plan the committee is overseeing. Operational creditors do not have a statutory right to a seat, though a resolution plan can voluntarily provide for their representation or observer status if the plan's drafters choose to include it.
Who bears the monitoring committee's costs and fees during plan implementation?
The approved resolution plan itself fixes how the monitoring committee's costs and fees are met, typically from the corporate debtor's own funds once the resolution applicant takes over management. The NCLT Bengaluru Bench has confirmed that a monitoring committee cannot claim fees beyond the ceiling the resolution plan fixes, regardless of how much work the committee actually performs, so the plan's own fee provision, not an open-ended reimbursement claim, governs what the committee can recover.
Vikrant D. Shetty | Vikrant D. Shetty leads the Insolvency and Arbitration Practice at Mumbai-based law firm Vikrant D. Shetty & Associates, Advocates & Solicitors. The firm advises financial creditors, operational creditors, and corporate debtors in proceedings before the National Company Law Tribunal (NCLT), Mumbai Bench, and represents parties in domestic and international commercial arbitrations seated in India and abroad, including enforcement and challenge proceedings before the Bombay High Court.
Related reading: Can Directors Be Personally Liable for a Company's Unpaid Tax Dues?.
This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please seek direct consultation with an advocate.
Comments