The Insolvency and Bankruptcy Board of India (“IBBI”) has recently notified several key amendments[1] in the CIRP Regulations[2], which aim to further streamline CIRPs[3] with special focus on real estate (RE) projects. These amendments give a formal effect to the recommendations/ suggestions that were proposed in the IBBI’s discussion paper, dated November 7, 2024, with an aim to enhance transparency, efficiency, and inclusivity of homebuyers in light of the unique challenges that arise in the CIRP of a RE entity.
In this blog, we have examined the issues that led to these amendments and assessed their effectiveness in safeguarding the interests of homebuyers and strengthening their position in the CIRP of an RE entity.
The key amendments and their impact
Handing over of possession of flats to homebuyers during CIRP
Imposition of a moratorium during CIRP prohibits, inter alia, alienation or transfer of assets of the corporate debtor (“CD”) to protect its value. However, where the CD is a RE company, this restriction prevents homebuyers from getting possession of their homes during the CIRP or, completing the registration of the sale deed if already in possession of their homes. This position of uncertainty has been stressful for homebuyers, who typically invest their life savings (in most cases) in RE projects.
To rectify this, the amendments now allow the Resolution Professional (“RP”) to hand over the possession of the plot/ apartment/ building and also facilitate its registration during the CIRP, provided the following conditions are met:
- the committee of creditors (“CoC”) approves the handover with at least 66% voting share;
- the homebuyer requests the RP for the handover; and
- the homebuyer has fulfilled all their obligations under the relevant agreement.
This amendment goes a long way in protecting the interests of homebuyers. It eliminates any uncertainty regarding the handover of possession or property registration. Prior to this amendment, the courts/ tribunals had to step in to provide similar comfort to homebuyers in several cases. For instance, in New Okhla Industrial Development Authority (Noida) Vs. Lotus 300 Apartment Owners Association[4], the Hon’ble Supreme Court had to direct the builders and the RP to proactively ensure that homebuyers are given possession of their flats and that the registered deeds are executed during the CIRP. Further, in Alok Sharma & Others Vs. M/s. I.P. Constructions Private Limited [5], where the RP refused to register the sale deeds because of moratorium, the NCLAT[6] had to step in to direct the RP to execute and register the sale deeds (as the homebuyers were already in possession)[7], with the observation that in case of CIRP of an RE entity, the sale of constructed apartments is part of the regular business operations of the CD, with the sale proceeds being recorded as revenue from operations, and therefore, such sale/ transfer is necessary for maintaining the going concern status of the CD.[8]
Participation of statutory authorities in CoC meetings
RE projects are often constructed on lands leased from the relevant state land development authorities/ corporation (termed as “competent authority”[9]) (such as NOIDA, YEIDA[10], etc.), which get categorised as operational creditors[11] and, therefore, do not get a seat on the CoC, which primarily comprises of financial creditors. CIRPs of such RE entities are fraught with issues connected with these competent authorities, which include outstanding lease rentals, approvals required for change in shareholding or the developer entity, etc. Such issues often act as a stumbling block in the resolution of an RE project, the latest example being the stalling of implementation of an approved resolution plan of NBCC[12] for Supertech Ltd. by virtue of a stay granted by the Supreme Court inter alia on a contention raised by YEIDA that the plan does not address the issue of unpaid dues of YEIDA[13].
To achieve a time bound and successful resolution of RE company, it becomes imperative that a SRA is able to navigate through these issues, in consultation with (and blessing of) the concerned competent authority quite early in the process. To achieve this objective, the amendments provide for the RPs to mandatorily invite the competent authority to the CoC meetings[14] after the direction of the CoC. The amendments provide the competent authorities the right to provide their inputs on matters associated with the completion of the RE projects.
This amendment will provide the CoC and the resolution applicants (RA) the benefit of perspective and inputs of the competent authorities much early in the process. This will enable the RA to provide an informed and wholesome resolution plan to the CoC, resulting in value maximisation and faster implementation of resolution plans.
Relaxation of eligibility criteria for homebuyers/ allottees as RAs
The insolvency of a RE entity presents unique set of challenges, such as regulatory hurdles, title related issues, pending litigations and funding for completion of projects. These often deter potential RAs from participating in the CIRP of RE entities. Additionally, homebuyers themselves may have reservations about a third party taking over the project, fearing that the new management may introduce unfavourable terms.
Recognising these challenges, the CIRP Regulations allow association of homebuyers to step in and submit a resolution plan. This allows the homebuyers to have a direct say in, and control over, the completion of their projects and even prevent the CD from liquidation. Prior to this amendment, the NCLT has, in several instances, intervened to prevent the CD from going into liquidation by approving the sole resolution plan submitted by the homebuyers’ association, despite objections on account of inter alia non-payment of performance guarantee[15].
To bolster the position of homebuyers as RAs and to ensure that they are not held to the same stringent financial and technical requirements as large (and financially stronger) corporate applicants, the amendments have allowed the CoC to consider certain relaxed eligibility criteria (both technical and financial) in cases where a resolution plan is proposed to be submitted by the homebuyers’ association. These amendments include waiver of submission of performance security (post CoC’s approval) and submission of earnest money deposit (at the time of submission of EoIs). This will also prevent the CD from going into liquidation for want of a resolution plan by ensuring participation from the homebuyers’ association.
Other amendments
Additionally, the following amendments have also been introduced to further streamline the CIRP of a RE company:
- The RP is required to prepare and submit a detailed report of the status of development rights and permissions required for the project development, within 60 days of the insolvency commencement date. This amendment aims to ensure that all stakeholders, especially the RAs, are made aware of vital information about a project so that a wholesome resolution plan is submitted, considered and implemented for achieving a successful and efficient resolution of the CD.
- The RP can now, with CoC directions, appoint an insolvency professional to act as a facilitator for a sub-class within a class of creditors (such as homebuyers), subject to conditions such as (a) the number of creditors in a class should be more than a thousand, and (b) a sub-class comprising of at least a hundred creditors out of the total number of creditors in a class, has requested for inclusion of an agenda for such appointment.[16] The amendments also delineate the roles and responsibilities of the facilitator, focussing on facilitating communication between the authorised representative and creditors of the sub-class.
Scope for strengthening the amendments
While these amendments are a significant step forward in protecting the interests of homebuyers, the authors believe that a few tweaks and dilutions (such as the following) could have further strengthened the objectives of these amendments.
- The CoC’s approval threshold for handing over of property during CIRP could have been kept at 51% (instead of 66%) as such handover doesn’t really affect the interests of financial creditors. Further, the RP should have been mandated to reach out to homebuyers (through the authorised representative/ facilitator), requesting preference of the homebuyers in connection with the handover of the possession.
- The amendments (mainly the one relating to the condition of fulfilment of the obligations by homebuyers under the relevant agreement) fail to address scenarios where the payment obligations of the homebuyers are linked to completion of various milestones by the developer. In such an event, homebuyers might not have made payments on account of pending dispute with the developer or non-completion of a milestone, thereby leading to ambiguity on fulfilment of such condition.
- Since land authorities play a crucial role in the CIRP of a RE entity, amendment should be introduced to provide that the inputs/ observations from the authorities are reflected in the information memorandum and the RP’s report to be submitted in connection with the project.
Conclusion
As per the latest data, almost 45% of the RE companies have been successfully resolved through IBC.[17] These new amendments, along with a slew of reforms introduced by the IBBI in the recent past, demonstrate the intent of the Government to protect the interests of stakeholders (especially homebuyers) and ensure a successful resolution of RE companies. Additionally, the judiciary has been proactive and inclusive in its approach while dealing with RE insolvency cases. Such a supportive regulatory framework and proactive judiciary will ensure that the interests of homebuyers are protected and viable projects are not stalled.
For further information, please contact:
Abhishek Mukherjee, Partner, Cyril Amarchand Mangaldas
abhishek.mukherjee@cyrilshroff.com
[1] Insolvency Resolution Process for Corporate Persons (Amendment) Regulations, 2025, as notified on February 03, 2025 and available on dad9d41a898644d81529c67ad5ff94b5.pdf
[2] IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
[3] Corporate Insolvency Resolution Process
[4] Order dated September 27, 2024 in SLP No. (Civil) 17238-17239/2024
[5] 2022 SCC OnLine NCLAT 246
[6] National Company Law Appellate Tribunal
[7] Ibid, Paragraph 6 (m).
[8] Ibid, Paragraph 6 (f).
[9] As defined under Section 2 (p) of the Real Estate (Regulation and Development) Act, 2016, which states that “competent authority” means the local authority or any authority created or established under any law for the time being in force by the appropriate Government which exercises authority over land under its jurisdiction, and has powers to give permission for development of such immovable property”
[10] Yamuna Expressway Industrial Development Authority
[11] The statutory authorities are considered as secured operational creditor to the extent of their dues payable under laws governing their establishment as upheld in New Okhla Industrial Development Authority vs. Anand Sonbhadra (2023), 1 SCC 724 and Yamuna Expressway Industrial Development Authority vs. Monitoring Committee of Jaypee, Order dated May 24, 2204 in Company (AT) (Insolvency) No. 493 of 2023
[12] National Building Construction Corporation (India) Ltd
[13] Order dated February 22, 2025 in Yamuna Expressway Industrial Development Authority v. NBCC (India) Limited and ors., C.A. No. 2240/2025 and connected matters
[14] Regulation 18(4) of the CIRP Regulations states that “Where the corporate debtor has any real estate project, the committee may direct the resolution professional to invite the ‘competent authority’ as defined in clause (p) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016) related to such project to attend such meeting(s) of the committee, as the committee may decide, without voting rights, for providing inputs on matters associated with the development of such project”
[15] Religare Finvest Limited vs. Mr. N. Kumar, Order dated July 16, 2024, in IBA/889/2019, Paragraph 5.12., Paridhi Finvest Private Limited vs. Value Infracon Buyers Association, Order dated February 9, 2024 in Company Appeal (AT) (Insolvency) No. 654 of 2022
[16] Other conditions are: (a) total number of facilitators shall not exceed five, and (b) the fee for facilitator for each sub-class shall be 20 % of the fees specified for the authorised representative and such fee shall be part of the CIRP Cost.
[17] As per the statement issued by the Chairperson of IBBI in the newsletter of IBBI (April-June 2024). Can be accessed at 86c56558be154749bc585af248ec94cb.pdf
