IBBI plans to do home buyers a good turn

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Phanphen Kaewwannarat

Homebuyers could soon find relief from cumbersome claim processes when lenders initiate insolvency against housing project developers, according to recent proposals from the Insolvency and Bankruptcy Board of India (IBBI).

The regulatory body suggests two key safeguards within the Corporate Insolvency Resolution Process (CIRP) to ensure equity and transparency. Resolution professionals would be required to document all property allottees – regardless of claim submissions – while resolution plans must guarantee fair treatment for these stakeholders.

Discussion paper

IBBI’s consultation document highlights limitations in current practices where only formally submitted creditor claims enter the Information Memorandum and influence resolution planning. This approach risks excluding legitimate buyers whose allocation details exist in company records but who miss claim submission deadlines.

Such exclusions create implementation challenges when omitted buyers later seek inclusion from resolution professionals or successful bidders, frequently leading to delays and legal disputes.

Industry experts welcome the initiative. “This aligns with constitutional recognition of housing rights while advancing financial inclusion principles,” remarked a senior executive from India’s Asset Reconstruction Companies association. “The proposals reinforce equitable treatment standards.”

The reform suggestions respond to judicial observations in the Puneet Kaur versus K V Developers case, where the National Company Law Appellate Tribunal emphasized fair resolution practices. The NCLAT ruling stated: “Non-consideration of legitimate claims reflected in corporate records creates unfair outcomes… resolution plans must address these documented liabilities.”

Record reasons for liquidation

IBBI’s discussion paper additionally introduces accountability requirements for liquidation decisions. When creditor committees opt for liquidation despite receiving compliant resolution plans that exceed asset liquidation values, they must now document their rationale.

This measure addresses instances where viable restructuring proposals were rejected without documented justification. Currently, regulations permit but don’t mandate recording liquidation considerations.

Experts highlight this aligns with the Insolvency and Bankruptcy Code’s emphasis on business revival. “Recording liquidation justifications preserves the code’s restorative intent when workable solutions exist,” observed an industry representative.

The framework modification would require resolution professionals to include documented liquidation reasoning when submitting applications to adjudicating authorities.

Published on November 18, 2025