IBBI Proposes Real Estate Related Changes In CIRP & Liquidation Regulations, Invites Public Comments Till 28th November 2023

The Insolvency and Bankruptcy Board of India (“IBBI”) on 06.11.2023 has published a Discussion Paper on Real-Estate related proposals to be introduced in Corporate Insolvency Resolution Process (CIRP) & Liquidation process under the Insolvency and Bankruptcy Code, 2016 (“IBC”). Accordingly, amendments have been proposed to IBBI (Insolvency Resolution Process for Corporate Process) Regulations, 2016 and IBBI (Liquidation Process) Regulations, 2016.

The IBBI has also invited comments from the public/stakeholders regarding proposed changes. The comments can be submitted online at www.ibbi.gov.in till 28.11.2023.

PROPOSED CHANGES

1. Mandatory registration and extension of projects under RERA: To expressly state that Insolvency Resolution Professional (IRP) or Resolution Professional (RP) must comply with the provision of the RERA Act and regulations framed thereunder. It is proposed to mandate the IRP/RP to register all real estate projects under RERA or to extend the registration of the real estate project under RERA, wherein the registration is expired or about to expire.
2. Operating a separate bank account for each real estate project: In line with the RERA provision for maintaining separate accounts for each project and to ensure transparency in the process, it is proposed that IRP/ RP should operate a separate bank account for each project undergoing CIRP.
3. Execution of registration/sublease deeds with approval of CoC during CIRP: To facilitate the smooth handover of occupied units or where possession has been transferred to home buyers, it is proposed to allow RP to handover the ownership of a plot, apartment, or building to the allottees through transfer during the resolution process, with the approval of CoC. Further, to avoid delays due to unnecessary holds-ups, it is also proposed that with the approval of the CoC, RP may also be permitted to hand over the possession of units to the allottees on ‘as is where is’ basis or on payment of balance amount, if any, after taking in to account the funds due and funds required for completing the unit.
4. CoC to examine and invite separate plans for each project: In view of the foregoing discussion that each project needs different treatment in terms of resolution, it is proposed to clarify that CoC on examination, may direct the RP to invite separate plan for each project. It would also encourage the association of allottees of a real state project to bring their own resolution plan and resolve issues in a specific project.
5. Exclusion of property in possession of homebuyers from the liquidation estate: Section 36 of IBC defines ‘Liquidation estate’ which states that for the purposes of liquidation, the liquidator shall form an estate of the assets which will be called the liquidation estate in relation to the corporate debtor. Clause (4) of Section 36 of IBC states a list of assets which shall not be included in the liquidation estate and shall not be used for recovery in the liquidation. Section 36(4)(e) further provides power to the Board to specify any other assets which shall not form a part of the liquidation estate of the Corporate Debtor. Board may specify, under section 36(4)(e) that assets in possession of the allottee be excluded from the liquidation estate.

PUBLIC COMMENTS INVITED

The IBBI has invited comments on the aforementioned proposals and draft amendments to IBBI (Insolvency Resolution Process for Corporate Process) Regulations, 2016 and IBBI (Liquidation Process) Regulations, 2016.

Comments may be submitted electronically by 28^th November 2023 on official website of IBBI at www.ibbi.gov.in

Click Here To Read The Paper