IBBI introduces landmark Amendment to the CIRP Regulations ensuring the welfare of Homebuyers, along with the introduction of RERA into the CoC
The Insolvency and Bankruptcy Board of India (“IBBI”) through a notification issued on February 3, 2025, amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“Regulations”) to secure the interests of homebuyers, with the purpose of enhancing the efficiency, transparency, and fairness in the Corporate Insolvency Resolution Process (“CIRP”) in cases of real estate projects and large creditor groups.
Inclusion of RERA into the CoC:
A significant amendment in the Regulations is the inclusion of the Real Estate Regulatory Authority (“RERA”) in the Committee of Creditors (“CoC”). Under Regulation 18(4), if any corporate debtor has a real estate project, then the Resolution Professional, on a direction by the CoC, will invite RERA to attend the CoC meetings, but without attributing any voting rights to it. The role of RERA has been kept limited to providing inputs on matters associated with the development of the project.
RERA’s inclusion in CoC meetings is a remarkable step to protect the interests of homebuyers who have invested their money in real estate projects. RERA having a comprehensive understanding of the real estate sector, is expected to provide significant insights into the viability and progress of ongoing real estate projects to help the CoC make informed decisions and prepare the best course of action.
Inclusion of RERA will also assist the CoC in ensuring that the resolution plan complies with all real estate laws and regulations, such as timely project delivery, meeting quality standards, registration requirements and reducing the risk of legal challenges from customers or regulatory authorities. The importance of RERA has also been highlighted by the Hon’ble Supreme Court in Pioneer Urban Land and Infrastructure Limited and Another vs. Union of India, (2019) 8 SCC 416.
RERA’s involvement will also help in prioritizing the completion of unfinished real estate projects as part of the resolution plan and ensure that clear timelines and milestones for project completion are included in the resolution plan.
Other significant amendments for the welfare of homebuyers:
Apart from inclusion of RERA in the meetings of the CoC, the IBBI has introduced the following amendments for the benefit of the homebuyers and stakeholders:
a. Resolution Professional empowered to transfer possession pending CIRP: A pivotal amendment is the introduction of Regulation 4E which obliges Resolution Professionals (“RP”) to transfer the possession of real estate units to the allottees who have fulfilled their financial obligations, after getting approval from at least 66% of the members of CoC. This is aimed at ensuring that allottees do not wait indefinitely for possession of their units. Additionally, the RP is required to assist in the registration process, by providing legal clarity and ownership rights to the said allottees.
This amendment also extends the benefit of the principle of Time-Value of Money to the homebuyers.
b. Introduction of “Facilitator”: To improve creditor’s representation in the CoC meetings, including the homebuyers, IBBI by incorporating Regulations 16C and 16D has introduced a concept of a Facilitator, who being an insolvency professional, may be appointed by the IRP or RP, where a particular group of creditors exceed 1,000 members forming a separate class of creditors. While the existing Regulation 16A already provides for appointment of an Authorized Representative to represent a class of creditors, the Facilitator will act as an intermediary between the Authorized Representative of the said class and the various creditors, thereby bridging the gap which often arises between the said group of creditors (including homebuyers) and their Authorized Representatives. It will also help in monitoring the actions of the Authorized Representatives in CIRPs of large real estate projects which involve numerous homebuyers.
For the appointment of a Facilitator, at least 100 creditors of a sub-class out of the total number of creditors in a class, after the first meeting of CoC, shall be required to make a request along with the name of their proposed Facilitator. However, the amendment also provides a maximum cap of up to five (5) facilitators that may be appointed. Their fee has also been capped at 20% of the fee of the Authorized Representative, appointed under Regulation 16A.
c. Codification of a Monitoring Committee: Another much-anticipated amendment in the CIRP Regulations is the regularization and codification of a Monitoring Committee by the introduction of Sub-Clause (4) in Regulation 38. The Monitoring Committee shall comprise the RP, Insolvency Professionals, CoC representatives, and Resolution Applicants for overseeing the implementation, and submission of quarterly progress reports to the Adjudicating Authority to ensure accountability and timely execution of approved plans. The importance of codification of the Monitoring Committee has been highlighted in various judicial precedents, including the Hon’ble Supreme Court in SBI v. Consortium of Murari Lal Jalan & Florian Fritsch, 2024 SCC OnLine SC 3945.
d. MSME disclosure with Expression of Interest: In the existing Regulation 36A of the CIRP Regulations, sub-clause (e), along with a proviso, has been added in Clause 4, mandating the disclosure of the Corporate Debtor’s MSME registration status at the stage of inviting an Expression of Interest. Certain relaxations have also been prescribed which may be given to the resolution applicant, in terms of (i) eligibility criteria, and (ii) conditions regarding refundable deposits. The said relaxation would however only apply in cases where the Corporate Debtor has a real estate project, wherein the committee contains an association comprising at least 100 homebuyers or 10% of total homebuyers of the respective project, whichever is lower.
Conclusion
The amendments to the CIRP Regulations have introduced welcome changes for the welfare of homebuyers, and are intended to ensure efficiency, transparency, and creditor protection. Matters such as timely handing over the possession of real estate units to homebuyers, appointing Facilitators for large creditor groups, and RERA’s inclusion in the CoC, will strengthen stakeholders' rights.