IBBI Introduces Amendments To Allow Homebuyers To Take Possession During CIRP

An Overview of Amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

Handing Over the Possession (Regulation 4E)

Regulation 4E has been incorporated which empowers the Resolution Professional to handover the flats, buildings or apartments during resolution process to Homebuyers after taking approval of the Committee of Creditors provided homebuyers have fulfilled all obligations. This will ensure that the distressed Hombuyers will not have to wait for a long time to get the possession of their properties.

This amendment ensures that homebuyers or allottees who have fulfilled their contractual obligations receive possession of their units in a real estate project. The resolution professional must facilitate the handover only after approval by 66% of the Committee of Creditors (CoC).

Appointment of Facilitators (Regulation 16C)

Furthermore, Regulation 16C provides that where the number of creditors in a class exceeds 1,000, the Committee of Creditors may direct the interim resolution professional or resolution professional to appoint another insolvency professional, other than the interim resolution professional, as a facilitator for a subclass within the creditors of that class.

The appointment of the facilitator shall be considered by the Committee only when a subclass comprising at least 100 creditors, out of the total number of creditors in the class, requests the same and proposes a name of the facilitator.

It further provides that the total number of facilitators shall not exceed five, and the fee for each facilitator shall be 20 percent of the fee paid to the authorized representative. This fee shall form part of the insolvency resolution process cost. Once appointed, a facilitator can be replaced by the Committee if a majority of members in the subclass recommend it.

This will ensure effective participation of the Homebuyers in the insolvency process. The primary role of the facilitators will be to facilitate the communication between authorized representative and creditors assigned to him. He will also be responsible for providing information to the creditors about the insolvency resolution process.

Participation of Competent Authority in Committee Meetings (Regulation 18(4))

Regulation 18(4) provides that the committee may direct the Resolution Professional to invite competent authority related to the real estate project of the corporate debtor to attend the meetings of the committee,without voting rights, for providing inputs on matters associated with the development of such project.

The Committee of Creditors (CoC) can now invite pertinent land authorities, like HUDA and NOIDA, to their meetings in order to get their opinions and input on issues pertaining to land development and regulations. In addition to improving the practicability and viability of resolution plans, land authorities' involvement would boost homebuyers' and other stakeholders' confidence in the resolution process.

Report on the status of development rights and permissions of real estate projects (Regulation 30C)

The Resolution Professionals have been enjoined to prepare a detailed report on the status of development rights, approvals and permission with respect to real estate projects of the corporate debtor within 60 days from the insolvency commencement date.

Expression of Interest (Regulation 36A & Form G Updates)

A proviso has been added to the Regulation 36A which states that the committee may relax eligibility criteria for submission of expression of interest and conditions regarding the refundable deposit for an association or group of allottees representing not less than ten per cent or one hundred creditors out of the total number of creditors in a class, whichever is lower in a real estate project of the corporate debtor.

Performance Security Requirement in Resolution Plans (Regulation 36B(4A))

Regulation 36B(4A) mandates that the resolution applicant provide a performance security which shall be forfeited if after the approval of the plan under section 30(4) of the code by the Adjudicating Authority, the applicant fails to implement the plan or contributes to the failure of implementation in accordance with the terms of the plan and its implementation schedule.

Monitoring Committee (Regulation 36B(4))

Regulation 36B(4) provides that the committee shall consider setting up a monitoring committee to monitor and supervise the implementation of the resolution plan. The monitoring committee may consist of resolution professionals, representatives of the committee and representatives of the resolution applicants. It further states that where the resolution professional is proposed to be the part of the monitoring committee, the fee payable to him shall be the same which he was receiving during the corporate insolvency resolution process. The monitoring committee constituted shall submit its report on a quarterly basis to the Adjudicating Authority outlining the status of the implementation of the plan.

MSME Registration Status

The Resolution Professionals are obligated to disclose the registration of the corporate debtor as a micro, small or medium enterprise. This move will enhance the participation of the prospective resolution applicants as they can avail various benefits and relaxations provided to the MSMEs under the Code.

Relaxations for Real Estate Allottees

The amendment will lead to increased participation of Association or Groups of Homebuyers as resolution applicants, as the Committee of Creditors has also been vested with the power to relax certain conditions for them. The relaxations will primarily be in the form of eligibility criteria, performance security and deposits for submitting resolution plans.

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