Insolvency Board proposes NCLT to mandatorily review 'all delayed claims', and limit CoC’s influence

Claims have to be submitted to the CoC and resolution professional within 90 days of the start of the CIRP.

• All delayed claims deemed acceptable to be placed before NCLT
• IBBI proposes excluding related operational creditors from CoC
• Proposal seeks to improve fairness and avoid conflicts of interest

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"All delayed claims" categorised as "acceptable" by the resolution professional shall now be placed before the National Company Law Tribunal (NCLT) for being considered a part of the resolution plan, suggests a discussion paper floated by the Insolvency and Bankruptcy Board of India (IBBI).

Under the Insolvency and Bankruptcy Code (IBC), a "claim" is the starting point of the resolution process. It is essentially a formal demand for money that a creditor says the company (the Corporate Debtor) owes them.

The paper says that despite the regulations being clear on the issue, in practise, "there appears to be some ambiguity regarding the sequencing and scope of consideration of such delayed claims. This leads to an interpretation that only those delayed claims which receive a recommendation of the Committee of Creditors (CoC) are required to be placed before the Adjudicating Authority (NCLT)."

The IBBI says that such an interpretation persists notwithstanding the settled legal position that adjudication of delayed claims vest exclusively with the Adjudicating Authority, and not with the CoC.

And therefore, to clear the ambiguity, the IBBI proposes that all delayed claims shall be put forth for consideration to the NCLT, within one week of being received by the resolution professional. It also says that the role of the CoC will only be recommendatory regarding the treatment of the claim.

RPS Infra case

In a 2023 case involving RPS Infrastructure Ltd, the Supreme Court had, however, held that admitting claims after the COC has already accepted a resolution plan, even though the NCLT has yet to approve the plan, would make the corporate insolvency resolution process (CIRP) an endless exercise.

RPS Infrastructure had won an arbitration award against KST Infrastructure, and had filed its claim during the ongoing CIRP of the latter.

RPS had filed its claim 287 days after the commencement of the resolution process (against the corporate debtor KST Infrastructure Ltd). And due to this, the Supreme Court rejected the claim, and at the same time placed the onus on RPS for failing to recognize the ongoing CIRP.

As per the IBC, claims have to be submitted to the CoC and resolution professional within 90 days of the start of the CIRP.

Though experts say that the IBBI proposal aims to balance "finality in CIRP with fairness to genuine creditors", some provisions are necessary to be introduced to ensure that the adjudication of delayed claims is not an automatic process, and the Claimant must be able to provide sufficient grounds justifying the delay in filing the claims.

"Delay in filing claims is detrimental to the timeline of the CIRP as any claims coming towards the fag end prior to the approval of the resolution plan by CoC may delay he negotiation process completely," said Madhav Kanoria, Partner, Cyril Amarchand Mangaldas.

Raheel Patel, Partner, Gandhi Law Associates, however, says that IBBI has proposed introducing a structured and court-supervised mechanism. "It brings procedural clarity and reduces arbitrariness, but its effectiveness will depend on strict timelines and judicial discipline to prevent misuse through tactical delays."

'Related' Operational Creditors to be excluded from CoC

The IBBI’s paper has also proposed to amend the current regulations to "expressly exclude related OCs from participation in the Committee of Creditors."

The IBC expressly excludes related financial creditors from the CoC to preserve independence of decision-making. Extending a similar principle to operational-creditor-only-CoCs would enhance fairness and credibility of the process, and prevent circumvention of CoC neutrality through related operational creditors.

At present, Regulation 16 of CIRP Regulations does not expressly exclude related operational creditors from participation in the CoC.

"This may give rise to conflicts of interest, influence by promoters or related entities through operational debt structures, and outcomes inconsistent with the objective of creditor-driven resolution," notes the IBBI.

Consider, for instance, a promoter-linked entity that provided advisory or consultancy services shortly before insolvency and files a claim as an Operational Creditor. If permitted to indirectly influence deliberations or negotiations, it could compromise the independence of the insolvency process. The proposed exclusion of ‘related’ Operational Creditors prevents such conflicted participation.

"Although the proposal may not significantly alter CoC composition in most cases, it safeguards the decision‑making structure of the CoC from being influenced by related‑party debt arrangements," Daizy Chawla, Senior Partner at S&A Law Offices.