Allotted flat won’t be part of liquidation process: IBBI
New rules of Insolvency & Bankruptcy Board of India (IBBI) provide for exemption of allotted property from liquidation process, providing much-needed relief to thousands of home buyers, whose real estate projects are caught in the insolvency resolution process for years with fear of liquidation dangling over their head.
“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,” IBBI said.
This means that home buyers, who have got possession of their flats, can stay in them even if the project goes into liquidation as their property will be outside the ambit of the exercise. Most real estate projects have not faced that situation yet.
IBBI is separately working on amendments to improve the insolvency resolution process, which has so far been slow for the real estate sector. The new rules were notified by IBBI , which also provides flexibility in cost reduction during the liquidation process.
The change in rule will mean that the liquidator can reduce the reserve price by up to 25% for assets, with existing valuation of the corporate insolvency resolution process (CIRP) once, provided it is approved by the Stakeholders’ Consultation Committee (SCC). For assets where fresh valuation is conducted during liquidation, the reserve price can be cut by up to 10% in subsequent auctions, with SCC’s approval.
Besides, liquidators have been given the power to sell assets of a company through private sale but through prior consultation with SCC. The steps are part of an exercise by IBBI to improve the liquidation process. Separately, an expert panel recommended phased introduction of a voluntary mediation as a dispute resolution mechanism under the Insolvency & Bankruptcy Code.
The committee has proposed the establishment of a dedicated and specialised NCLT-annexed insolvency mediation cell with an independent secretariat to administer, oversee, and manage the conduct of insolvency mediations under the law.
