Let us first look at what is it that the IL&FS board has proposed to NCLAT. It has actually proposed 3 essential changes. Firstly, it has proposed that all resolution related costs including legal and administrative fees will rank on first priority. Secondly, after that the average liquidation value will be arrived at and distributed to the creditors and anything that is left will be distributed pro-rata among creditors. Last and most important, the COC will only have a say with reference to voting on the highest bidder. Specifics pertaining to the actual distribution of the liquidation and the methodology adopted will be decided by the board and not by the COC. This will address a major anomaly as, in the past, operational creditors had typically got a raw deal in NCLT cases. Curbing the wide powers of the COC will address this to some extent.

While this does look good on paper, there are practical problems that still remain. Consider this for instance. While this is technically feasible, remember that IL&FS is a unique case! A professional board was specifically brought in to manage the dissolution, which is not the case with other similar bankruptcies. Even in the IL&FS case, this is subject to the NCLAT approval and they may be wary of setting a precedent, which may be hard to replicate. But the point is taken that the operational creditors must get a better deal. How it should be done and who should take the final call would still have to be addressed in a better way.