The IBBI has amended the liquidation process, offering relief to the home buyers and requiring the formation of an SCC. The committee, consisting of creditors of the company undergoing liquidation, will oversee the liquidator's critical operational aspects. These changes may have significant implications for India's insolvency and bankruptcy framework.
The Insolvency and Bankruptcy Board of India (IBBI) has recently made a significant move that is expected to have a positive impact on stakeholders involved in the liquidation process. This new move is aiming to increase confidence in the process and make it more transparent and efficient. Under this move, the IBBI has introduced several housing initiatives to the liquidation process to ensure that it is fair and equitable for all parties involved.
These changes include better protection for the rights of stakeholders, more clarity on the timelines for completing the process, and greater accountability of the liquidator.
As a result of this new measure, it is hoped that these changes will help to restore trust in the liquidation process and lead to better outcomes for all stakeholders.
Homebuyers who have been allocated and have taken possession of housing units in stalled projects can now take comfort in the knowledge that their residences are no longer liable to be incorporated into the “liquidation estate” of such projects. This development marks a promising turn of events for those who have been impacted by the disruption of these housing initiatives, as it will afford them greater stability and security in their housing arrangements.
Simply, liquidators are prohibited from selling these already allotted and possessed housing units as part of the liquidation process, as per the latest amendments to liquidation process regulations, say experts.
Hari Hara Mishra, CEO of the Association of ARCs in India, stated that relief has been extended to homebuyers by exempting allotted housing under possession from the liquidation estate.
Anjali Jain, a partner in the Insolvency and Restructuring Practice at Areness, a law firm, stated that the discretionary powers of liquidators have been restricted with checks and balances in the liquidation process. This is particularly applicable to the compromise or arrangement scheme under Section 230A of the Companies Act, 2013, decision-making related to auctions, determination of prices, disputes, and the discovery of sales mechanism.
IndusLaw's Padmaja Kaul stated that the latest changes to liquidation process regulations mark a significant step towards enhancing accountability, transparency, and stakeholder-centricity by increasing SCC participation, thus strengthening inclusivity and answerability within the process.
She further added, "It mandates meaningful consultation with stakeholders before pivotal decisions, such as compromise or arrangements, asset sales or sale as a going concern, litigations and valuation, thereby ensuring their interests are prioritised.”
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