NEW DELHI: The Insolvency and Bankruptcy Board of India (IBBI) on Thursday proposed reforms to streamline the insolvency process for real estate companies and enhance protection for stakeholders. These amendments have been proposed to enhance the efficiency and effectiveness of real estate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) rules.
In a discussion paper issued on Thursday, IBBI said one of the major proposals is the inclusion of land authorities in Committee of Creditors (CoC) meetings as invitees without voting rights.
In corporate insolvency resolution processes (CIRP) involving real estate companies, land authorities play a crucial role but currently lack mandatory representation in the CoC, IBBI said.
Currently, only financial creditors have representation in the CoC, leaving out land authorities despite their critical role in real estate projects,
Their inclusion will enhance and bring clarity on regulatory compliance, and ultimately improve the feasibility of resolution plans, it added.
The discussion paper also highlighted issues related to cancelled land allotments in insolvency cases, wherein the IBBI proposed that resolution professionals report such cancellations to the CoC, allowing stakeholders to make informed decisions on whether to pursue liquidation or continue with the resolution process.
Additionally, the board recommends facilitating creditor representation by allowing for multiple facilitators in cases with large numbers of creditors primarily to improve communication and representation.
Further, to improve transparency, the IBBI recommended that the meeting minutes of CoC for real estate projects will be accessible to all creditors through a secure online system.
This will in turn enhance transparency and counter rumours and misinformation. The paper also proposed changes to streamline the possession handover process for real estate projects, allowing resolution professionals to transfer ownership to homebuyers who have fulfilled their financial obligations, subject to CoC approval.
Accordingly, the IBBI has asked stakeholders to provide comments on the proposals by November 27. After considering the comments, the board proposed to make rules under clause of section 196 of the code.
