The latest amendments introduced by the Insolvency and Bankruptcy Board of India (IBBI) has put checks and balances on the actions of the committee of creditors (CoC) involved in the resolution process of a bankrupt entity, thereby potentially opening the floodgate of litigation by unsuccessful bidders and dissenting creditors.

Under the revised framework, which have been notified through IBBI (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations 2026, the CoC will now be required to provide stronger justification for key decisions taken during the resolution process. For example, the lenders will not only have to consider fair and liquidation values while evaluating bids but also undertake a mandatory market discovery exercise, including a challenge mechanism, which was previously optional in many cases.

The changes suggest a shift from the long-standing principle that the CoC’s commercial wisdom is beyond the judicial review. Experts argue that the amendments introduce additional safeguards on lenders’ decision-making with the objective of ensuring greater transparency and value maximisation.

“IBBI is going into the direction where CoC’s commercial wisdom will no longer be sacrosanct. CoC will have to justify every decision. It may defeat the purpose of IBC to be managed by lenders (CoC) under the supervision of National Company Law Tribunal (NCLT),” said Ashish Parwani, senior partner at Rajani Associates.

Insolvency professionals however caution that the enhanced justification requirements from CoC could trigger a fresh wave of litigation from dissenting creditors and unsuccessful bidders seeking to challenge the outcome of bid evaluations.

Further, the board has introduced has clarified that the representative of operational creditors on the CoC will be selected from among 18 largest unrelated operational creditors. In cases where the number of such unrelated operational creditors is fewer than 18, all of them will be included. This is intended to ensure that operational creditors who are related to or have a close connection with the corporate debtor should not influence decisions that are supposed to reflect the views of independent operational creditors.

Separately, The IBBI has sought to give operational creditors a greater voice in insolvency proceedings. Under the new rules, if lenders other than scheduled banks and public financial institutions (PFI) hold more than 66% voting power in the CoC, the resolution professional (RP) will have to invite 5 largest unrelated operational creditors, including the three largest statutory authorities to whom dues are owed, to attend CoC meetings as observers. It may be noted that these creditors will not have any voting rights, but their observations will be formally recorded in the meeting minutes.

“The amendment requiring certain operational creditors and statutory authorities to attend CoC meetings and have their observations recorded appears to privilege scheduled banks and PFIs over sophisticated private creditors,” said Devendra Mehta, partner at PwC.

The regulator has also overhauled the framework around the resolution process costs by asking RPs to place before CoC all the process costs till the first meeting of the committee along with the justification for incurring such costs. RPs will also have to prepare a detailed “Going Concern Assessment Report” with estimates of income, expenditure, cash flows, working capital requirements, and the risks of value erosion if operations are continued or suspended. Based on this report, the CoC will decide whether the corporate debtor should continue operating during the insolvency process and determine the scope and duration of such operations.