Code of Conduct for Creditors under the Insolvency and Bankruptcy Code, 2016 - Fall of Supremacy of Committee of Creditors ?

The Insolvency and Bankruptcy Code, 2016 (IBC) envisages a creditor-centric corporate insolvency resolution process. Under the IBC, the Committee of Creditors (CoC) of the Corporate Debtor, CD is responsible for resolution of the CD’s debt through collective exercise of commercial wisdom. On one hand, the IBC provides for supremacy of the CoC’s commercial wisdom in determining the mode of debt recovery and negotiating the resolution plan and is lenient towards how CIRP is organized and conducted by the CoC. On the other hand, the IBC mandates that decisions taken in exercise of commercial wisdom do not deviate from the objectives of the IBC and attempts to streamline the CIRP, through a check and balance system comprising of the resolution professional (RP) and the adjudicating authority (NCLT/NCLAT). In some cases, the members of the CoC have acted in ways unbecoming of their responsibilities under the IBC. The consequent decline in trust and confidence placed in the CoC by the legislature, has prompted the IBBI to draft a Code of Conduct, acknowledging the concerns of the RP and the AA and, prescribing explicitly, the conduct expected of the members of the CoC under the IBC. The Code of Conduct is thus, an instrument intending to strengthen and supplement the IBC, by ensuring that the IBC is implemented in letter and spirit by the CoC. However, the consequences of possible ways of enforcement of the Code may be construed to have brought about the fall of supremacy of the CoC. Since, supremacy of CoC is a prominent and fundamental feature of the IBC, it is unlikely that the Code created to supplement the IBC, is intended to dilute its mandate. Nevertheless, the Code may be analyzed to see if effective enforcement of the Code would inevitably result in the fall of CoC’s supremacy