Homebuyers can now Take Possession during CIRP: IBBI Introduces Amendments to IRP of Corporate Persons Regulations, 2016

Through Notification No. IBBI/2024-25/GN/REG122, dated 03.02.2025, the Insolvency and Bankruptcy Board of India ( IBBI ) has proposed changes to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.  The purpose of these modifications is to improve the corporate insolvency resolution process's (CIRP) efficiency and transparency, especially with regard to real estate developments.

A number of provisions have been altered by the 2016 Amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations.

 The addition of Regulation 4E gives the Resolution Professional the authority to transfer buildings, apartments, or flats to homebuyers throughout the resolution process with the Committee of Creditors' consent, as long as the homebuyers have met all of their responsibilities.  The distressed homebuyers won't have to wait long to take ownership of their residences thanks to this.

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 This amendment guarantees that units in a real estate project are given to homebuyers or allottees who have complied with their contractual duties.  Only after receiving permission from 66% of the Committee of Creditors (CoC) can the resolution specialist enable the handover.

Additionally, according to Regulation 16C, if a class of creditors has more than 1,000, the Committee of Creditors may instruct the interim resolution professional or resolution professional to designate a different insolvency professional as a facilitator for a subclass of the class's creditors. The Committee will only take the facilitator's appointment into consideration if a subclass of at least 100 creditors—out of the class's total number of creditors—requests it and suggests a facilitator's name.

Additionally, it stipulates that there can be no more than five facilitators in total, and that each facilitator must get 20% of the amount paid to the designated representative.  This charge will be included in the cost of the insolvency resolution procedure.  If a majority of the subclass members suggest it, the Committee may replace a facilitator after they have been selected.

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This will guarantee the Homebuyers' effective involvement in the bankruptcy procedure.  Facilitating contact between the designated authorized representative and his creditors will be the facilitators' main responsibility.  He would also be in charge of informing the creditors about the procedure for resolving insolvency.

 According to Regulation 18(4), the committee may instruct the Resolution Professional to invite qualified authorities involved in the corporate debtor's real estate project to attend committee meetings without the ability to vote in order to offer input on issues pertaining to the project's advancement.

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In order to gather their thoughts and input on matters concerning land development and regulations, the Committee of Creditors (CoC) can now invite relevant land authorities, such as HUDA and NOIDA, to their meetings.  The participation of land authorities would increase the confidence of homebuyers and other stakeholders in the resolution process, as well as make resolution plans more feasible and viable.  Within 60 days after the bankruptcy commencement date, the Resolution Professionals are required to submit a comprehensive report on the situation of development rights, approvals, and permissions pertaining to the corporate debtor's real estate projects.

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.

According to amendment, the  Regulation 36B(4A), the resolution applicant must provide a performance security, which will be forfeited if, following the Adjudicating Authority's approval of the plan under section 30(4) of the code, the applicant fails to carry out the plan or aids in its failure to do so in line with the terms of the plan and its implementation schedule.

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As per Regulation 36B(4), the committee must think about forming a monitoring committee to keep an eye on and oversee the resolution plan's execution.  Resolution specialists, committee representatives, and representatives of the resolution applicants may make up the monitoring committee.  Additionally, it specifies that the resolution professional's fee will be the same as what he received throughout the corporate insolvency resolution procedure if he is suggested to join the monitoring committee.  The Adjudicating Authority will receive a quarterly report from the established monitoring committee detailing the plan's execution status.

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The Resolution Professionals are required to reveal the corporate debtor's registration as a micro, small, or medium-sized business in cases pertaining to MSME registrations.  Because they can take advantage of the many advantages and relaxations granted to MSMEs under the Code, this action will increase the involvement of potential resolution applicants.

As a result of the reform, associations or groups of homebuyers will be more likely to apply for resolutions because the Committee of Creditors now has the authority to loosen some requirements for them.  Eligibility requirements, performance security, and deposits for submitting resolution plans will be the main ways that the relaxations are implemented.

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