Insolvency and Bankruptcy Board: In its most recent amendment, the Insolvency and Bankruptcy Board of India stated that assets in a real estate project that have been turned over to the allottees would be exempted from the liquidation process. This is a relief to homebuyers who had been given possession of their homes but were left in a bind after the builder’s company was declared insolvent.
Insolvency and Bankruptcy Board of India’s Recent Amendment
In a recent amendment, the Insolvency and Bankruptcy Board of India declared that assets in a real estate project that have been transferred to the allottees will not be subject to the liquidation procedure.
The notification dated February 12 said: “For the purposes of clause (e) of sub-section (4) of section 36, wherever the corporate debtor has given possession to an allottee in a real estate project, such asset shall not form a part of the liquidation estate of the corporate debtor.”
Exclusion of Occupied Properties from Liquidation
In other words, properties that the allottee has already occupied ought to be kept out of the liquidation estate. This implies that even in the event of the builder’s liquidation, a buyer who has already been granted possession of a house will keep it. Previous to this modification, in the event that the builder became insolvent, the buyer who had obtained ownership of the property was bundled with buyers who had not, and they had no recourse other than the right to a refund.
IBBI’s Proposed Adjustments
The IBBI has proposed these adjustments to address this problem and make sure that these apartments—for which ownership has already been offered but no conveyance deed has been executed or registered—are not included in the liquidation estate. He clarifies that these rules will only be applicable if a corporation is going through liquidation and that they will apply prospectively.
According to experts, this provision gives purchasers assurance that finished projects won’t be included in liquidation. It looks after purchasers who have already gotten their units. As it is frequently observed that certain resolution applicants are not interested in all projects and want to execute some specific projects, this may also result in Resolution Professional (RP) inviting a separate resolution plan for each real estate project or set of projects of the corporate debtor.
CoC’s Authority for Distinct Resolution Strategies
The committee of creditors (CoC) may request distinct resolution strategies for every project, according to the IBBI.The IBBI amendment also mandates that each real estate project under a corporate debtor have a separate bank account in order to guarantee financial transparency and responsibility, according to the IBBI.
These changes are crucial since thousands of purchasers have previously been entangled in a protracted and intricate legal dispute following the builder’s bankruptcy. The Insolvency and Bankruptcy Board of India (IBBI) reports that real estate represents the second-highest category of cases involving insolvency resolution. With 40% of the total, the manufacturing sector holds the largest share, followed by real estate (21%), construction (11%), and trading (10%).
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