The central government has proposed several amendments to the current insolvency law regime in a bid to strengthen and quicken the entire process. The Insolvency and Bankruptcy Code (IBC) came into effect in 2016 and has since then been amended numerous times to accommodate the changing needs. Suggestions with regard to real estate include distinguishing between defaulted real estate projects and solvent projects, allowing transfer of ownership and possession to the allottees with the consent of the CoC and allowing allottees of a completed unit to request for ownership and possession of a completed unit during a CIRP or a project-specific resolution process.
The central government has proposed several amendments to the current insolvency law regime in a bid to strengthen and quicken the entire process. The Insolvency and Bankruptcy Code (IBC) came into effect in 2016 and has since then been amended numerous times to accommodate the changing needs. It provides for a market-linked and time-bound resolution of stressed assets. Some of the suggestions include expanding the existing framework and developing an electronic platform to reduce the need for human intervention.
A notice was released by the ministry of corporate affairs discussing the changes suggested by the government. Amendments forwarded pertain to the admission of corporate insolvency resolution process (CIRP) applications, streamlining processes, and the role of service providers under the Code. A suggestion has been made to create an e-platform to undertake tasks such as filing of applications with the Adjudicating Authority (AA), delivery of notices, storge of records of the corporate debtors (CD), etc. The ministry has also proposed changes to the fast-track corporate insolvency resolution process (FIRP) to allow financial creditors to allow informal or out-of-court resolution plans and involve the Adjudicating Authority only for its final approval or moratorium if needed.
The ministry of corporate affairs also made suggestions pertaining to corporate debtors who are promoters of real estate projects. For applications filed to initiate the CRIP process of a CD who is a promoter of a real estate project and who’s defaults pertain to one or more of its real estate projects, a suggestion has been made the AA shall at its own discretion admit the case but apply the CIRP provisions only to those real estate projects which have defaulted. Thus, allowing unconcerned real estate projects to continue as per status quo.
Other suggestions made in this regard are to enable the Resolution Professional (RP) to transfer ownership and possession of the plot, apartment or building to the allottees with the consent of the Committee of Creditors (CoC) and to allow allottees of a completed unit to request for ownership and possession of a completed unit during a CIRP or a project-specific resolution process. Further, they have recommended that the CD can propose that an IRP be changed in which case a new IRP should be appointed by the AA on the recommendation of the IBBI.
With these recommendations, the government hopes to take the fast-track CIRP outside the judicial process and quicken the disposal of the CIRP. By ensuring the AA plays a limited role in approving the final plan, the government believes the interests of the stakeholders and others are duly protected.
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