Providing relief to the home buyers, the Insolvency and Bankruptcy Board of India (IBBI) has recently made a change to the rules regarding liquidation processes for companies involved in real estate projects.Under the new rule, flats that have already been allotted to buyers will not be considered part of the liquidation estate (assets that can be sold to pay off creditors) if possession has been handed over to the allottee.This means that homeowners who have already received their flats are protected and their homes cannot be taken away during the liquidation process.The decision to make amendments in the regulations was taken during a meeting on February 12, 2024.Insolvency and Bankruptcy Board of India amends the Insolvency and BankruptcyBoard of India (Liquidation Process) Regulations, 2016.Please read more at https://t.co/Q84dZkxdaf— Insolvency and Bankruptcy Board of India (@IBBIlive) February 13, 2024According to the official press release, these changes are aimed at facilitating a smoother process for liquidation, ensuring accountability, and bolstering the confidence of stakeholders in the liquidation process. Key amendments include:With the consent of the Stakeholders Consultation Committee (SCC), the liquidator may, once during the process, reduce the reserve price by up to 25% for assets with current valuations under the Corporate Insolvency Resolution Process (CIRP). With the consent of the SCC, the reserve price for assets that undergo new appraisal during liquidation may be lowered by up to 10% at ensuing auctions.The liquidator may only sell the corporate debtors (CD) assets through a private sale after first consulting with the SCC the confirmed buyer will only be determined following this consultation. Additionally, the liquidator no longer has the option to sell an asset privately, meaning that the asset is sold at a price higher than the reserve price of a failed auction.The liquidator may decide to prolong the remaining sale consideration payment period past ninety days, after consulting with the SCC. What is the liquidation processOn failure to resolve the corporate debtor, the liquidation process commences. Under the process, the liquidator realises proceeds from the sale of the assets of the Corporate Debtor (CD) or the sale of the CD as a going concern. The proceeds are then distributed to the stakeholders. On the distribution of the proceeds, the liquidator files an application before the Adjudicating Authority (AA) for dissolution of the CD or closure of the liquidation process.Here are some of the potential benefits to the buyersAmending the law to exclude allotted flats from a companys liquidation process could potentially help home buyers in several ways.Protecting ownership: If the flat is already legally allocated to the buyer through a completed sale agreement and registration, excluding it from liquidation could ensure that the buyer retains ownership even if the company liquidates. This could prevent them from losing their home and facing lengthy legal battles to recover their investment.Facilitating completion: Removing the flat from the liquidation process could potentially simplify and expedite the completion of construction and handover to the buyer. This is because liquidators might prioritize selling assets quickly to pay off creditors, which could delay construction or lead to disputes over ownership.Enhancing confidence: Such an amendment could boost confidence in the real estate market by providing home buyers with greater legal protection and reducing the risk of losing their investment in case of company insolvency. This could potentially attract more buyers and investments in the sector.
