Critical Analysis Of Project-Wise Corporate Insolvency Resolution Process (CIRP) Under The Insolvency And Bankruptcy Code, 2016
- IJLLR Journal
- 4 minutes ago
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Suzanne Sircar, O.P Jindal Global University
ABSTRACT
The emergence of real estate insolvency is one of the most significant challenges in India’s insolvency system. In real estate insolvency, the list of stakeholders is much more varied than in corporate insolvency, with often results in conflicting interests. While financial institutions are primarily interested in recovering their debts, on the other hand, homebuyers are particularly concerned about gaining possession of properties for which they have often spent their life savings to purchase. The insolvency regime therefore as established by the Insolvency and Bankruptcy Code, 2016 (IBC), based on a creditor-centric approach, often fails to meet these different needs. To this, Indian courts have started developing the concept of project-wise Corporate Insolvency Resolution Process (CIRP), where the insolvency proceedings can be restricted to the distressed projects and not the entire projects of the real estate developer. This judicial invention has, in turn, been suggested by the regulatory system in the form of amendments to the CIRP Regulations in February 2024 by the Insolvency and Bankruptcy Board of India (IBBI). The primary objective of project wise CIRP has always been to safeguard the interest of homebuyers and to further save the viable projects. Having said that, there remains questions regarding the practical impact of project-wise CIRP, and its legislative and judicial purpose. This paper therefore attempts to show that though homebuyer protection is the reason to promote the project-wise CIRP, the functioning of the CIRP, including the composition of the Committee of Creditors, the contradiction in Section 29A, the lack of statutory codification, and the dominance of secured financial creditors in the CoC composition, often works in favour of the secured financial creditors and, surprisingly, in favour of the promoters of the project. A significant shortfall between the principle of protection of homebuyers and project level insolvency resolution is therefore observed.
Keywords: Insolvency & Bankruptcy Code, Project-Wise CIRP, Homebuyers, Real Estate Insolvency, Committee of Creditors, IBBI Amendment
