Insolvency Regulator _IBBI have put forward a host of proposals to improve real estate resolutions under the IBC, including making it mandatory for land authorities to be included in Committee of Creditors (CoC) meetings in cases involving real estate companies.

The discussion paper released by the Insolvency and Bankruptcy Board of India (IBBI) on Thursday aims to improve the efficiency and effectiveness of real estate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). Stakeholders will have to electronically submit their views on the seven proposals and draft amendments to the CIRP regulations by November 27, IBBI said.

In corporate insolvency resolution processes (CIRPs) involving real estate companies, land authorities play a crucial role but currently do not have mandatory representation in the CoC.

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Currently, financial creditors are included in the CoC, while land authorities, who are generally operational creditors, are not. This absence may lead to insufficient consideration of the views of land authorities on matters relating to land and regulatory requirements, which could result in delays or complications in the implementation of resolution plans due to challenges. unforeseen.

Furthermore, the valuable input of land authorities, which can improve the viability and feasibility of resolution plans, is often overlooked, reducing coordination between insolvency proceedings and land matters. “Given the importance of land assets and associated regulatory compliance in real estate projects, there is a clear need to ensure that land authorities have a formal channel to provide input during the CIRP, whilst retaining the decision-making power of financial creditors,” the discussion paper said.

Competent authorities

IBBI therefore proposed to include relevant authorities (including land authorities) as invitees to CoC meetings in cases involving real estate companies, without voting rights.

By providing relevant authorities, including land authorities, with the opportunity to provide feedback and raise concerns during the CIRP, while preserving the decision-making power of the CoC, the proposed changes address an important issue in the regulatory framework.

From a stakeholder perspective, the presence of these competent authorities at CoC meetings can improve transparency and build confidence among homebuyers and other stakeholders in the resolution process.

critical player

Siddharth Srivastava, Partner at Khaitan & Co, said, “While all the changes proposed in the discussion paper will benefit the stakeholders, in my opinion, the most important suggestion is the inclusion of land authorities in the CoC (without right to vote). As the land authority is a critical player in a successful resolution, it must be aware of the contours of the resolution plan and CIRP and should help ensure future compliance, he said.

“This is also likely to resolve the implementation issues faced by successful bidders due to lack of cooperation from land authorities due to processing of their claim,” Srivastava added.

Hari Hara Mishra, CEO of the Association of ARCs in India, said that the latest IBBI newsletter of June 2024 rightly placed emphasis in its editorial on ‘revival of real estate’. “This discussion paper attempts to bridge all operational bottlenecks in real estate revival by integrating all stakeholders and removing information asymmetry among them. For the first time, he proposed the inclusion of land authorities in CoC meetings. Overall, the measures are aimed at facilitating better resolution outcomes in real estate projects and safeguarding the interests of homebuyers,” Mishra said.

Seven key propositions:

• Include land authorities in CoC meetings

• Settle canceled land allocations in the event of real estate insolvency

• Give CoC the means to allow beneficiary associations to participate as candidates in the resolution.

• Clarify the inclusion of interest in homebuyer CIRP applications.

• Facilitate the representation of large creditors through designated facilitators

• Share minutes of CoC meetings with all creditors of the real estate project class

• Streamline the transfer of possession in real estate projects