CIRP Regulation 2025: Streamlining the process for Real Estate Insolvency
Amitesh Mishra
4th year, B.A. LL.B (Hons.), Hidayatullah National Law University.
Introduction
The Insolvency and Bankruptcy (Amendment) Act, of 2018, recognized the amount raised under real estate projects as financial debt, [1]by classifying the amount raised by allottees as a commercial transaction. Thus, acknowledging the home-buyer-initiated Corporate Insolvency Resolution Process (CIRP). The Supreme Court in [2]Pioneer Urban Land and Infrastructure v. Union of India further upheld the amendment’s constitutionality. The reason for such classification was to safeguard the position of home buyers under insolvency law. The 2018 amendment was preceded by ambiguity regarding home buyers’ position under IBC, where they weren’t precisely classified as operational or financial creditors, which obstructed their CIRP application.
Notwithstanding the aforementioned remedial measure home-buyer’s position remains precarious under IBC and the risk of non-delivery of the property and ineffective CIRP persists. Therefore, to further streamline the CIRP of real estate projects, the Insolvency and Bankruptcy Board of India has introduced amendments to Corporate Insolvency Resolution Process (CIRP regulation 2025), which includes measures like Monitoring agencies, Facilitators, etc.
This article will analyze the CIRP 2025 in light of the discussion paper of the IBBI on real estate insolvency, identifying steps that can be expanded to include the CIRP in general. This article identifies the progressiveness of the CIRP regulation 2025 while raising caution for a pragmatic application.
Addressing Real Estate Distress
Handover of Possession During CIRP
Insertion of Regulation 4E, allowing transfer of possession amidst an impending CIRP is a noteworthy alteration. A real estate property’s possession can be transferred by the Resolution professional on the approval of 66 percent of the Committee of Creditors and when the allottee has completed his part of obligations, such as a deposit of adequate funds. This regulation has been inserted to alleviate homebuyers’ anxiety and solidify their position as a financial creditor.
However, this marks an exception to provisions of the moratorium, [3]which disallows any transfer of assets amidst an ongoing CIRP. IBBI explains in its discussion paper that such transfer can be entered into the corporate debtor’s balance sheet as a profit, preventing the corporate debtor from going concern. [4]Therefore, IBBI acknowledges the regulations as a valid exception to the moratorium.
In the future, more such exceptions to moratorium might be adopted to ease CIRP involving financial creditors whose interest depend on the transfer of corporate debtor’s property.
Report on Rights and Permissions
The newly inserted regulation 30C of the CIRP regulation 2025 mandates the Resolution professional to submit a status report of developmental rights and permissions necessary for the real estate project’s completion. The report shall be submitted to the committee of creditors. Additionally, this report shall be submitted to the adjudicating authority within 60 days from the date of commencement of insolvency, with the comments of the committee of the creditors.
This regulation enhances CRIP transparency and renders home buyers well-informed. Further, the submission of the report to the adjudicating authority ensures that compliances necessary for the effective development of the real estate project are complied with.
Land Authorities and CoC meetings
The land authorities play a crucial role in any kind of real estate project, but because they mostly being operational creditors, they are unable to partake in meetings of the Committee of Creditors. The CIPR Regulation 2025 amended Regulation 18 by addition of sub-regulation (4). The new sub-regulation allows the invitation of competent authorities to meetings of the Committee of Creditors by resolution professionals on the direction of the Committee. Here competent authority is as defined under section 2(p) of the Real Estate (Regulation and Development) Act, 2016. The Participation of the competent authority attributes them no voting rights. This bridges the long-standing communication gap between insolvency resolution and state development authorities, potentially reducing litigation risks post-resolution.
This measure can be extended to CIRP in specialized industries, wherein competent authorities might be invited to provide their input.
Strengthening Creditor Participation
Appointment of Facilitators for Large Creditor Classes
Regulation 16C of the CIRP regulation 2025 enables the committee to appoint a facilitator when a class of creditors exceeds 1000 members. The facilitator might be appointed for any sub-class of a class of creditors. A facilitator would be appointed only if, after the first meeting of the committee, a sub-class comprising of at least one hundred creditors out of the total number of creditors in a class, requests for the inclusion of an agenda for such an appointment along with the name of the proposed facilitator. Before this amendment, a sole Authorized Representative would represent an entire class of creditors. This was highly inefficient and prone to conflicts, in case a class comprised of multiple sub-classes.
The appointment of a facilitator would optimize the communication between a sub-class within a class of creditors and the Committee of Creditors, resulting in a seamless CIRP. Facilitators would act as neutral liaisons, reducing chaos in mass claims.
Relaxation for Homebuyer Associations as Resolution Applicants
Sub-regulation (4) of Regulation 36A has been added to allow relaxations in the expression of interest and refundable deposits in real estate projects, for associations or groups of allottees. The group of allottees should not represent less than ten percent or one hundred creditors from the total creditors within a class, whichever is lower. This ensures the involvement of vital stakeholders such as associations of allottees in the CIRP. Previously, the Association of allottees didn’t have any representation in the CIPR and only individual allottees were present.
Transparency and Accountability Measures
Disclosure of MSME Registration Status
The newly inserted sub-regulation 4(e) of regulation 36E mandates that an invitation expression of interest by the Resolution Professional in the CIRP shall contain the corporate debtor’s registration status as a micro, small, or medium enterprise under the Micro, Small and Medium Enterprises Development Act, 2006. This would catalyze the participation of small resolution applicants who may avail the benefits of the MSME schemes.
Mandatory Monitoring Committees
The CIRP regulation 2025 amends regulation 38 to add sub-regulation 4 which mandates the establishment of a monitoring committee. The monitoring committee would supervise the implementation of the resolution plan and submit quarterly reports to the adjudicating authority. This would ensure a proper implementation of the resolution process further aiding the anxieties of the homebuyers and affirming consumer confidence.
Conclusion
A home buyer is always precariously placed in a CIRP due to the possibility of non-delivery of their property. Since 2016 the IBC has gone through multiple modifications to strengthen the position of homebuyers in CIRP. The recent amendments to the CIRP regulations are a step towards a much more efficient and trustworthy CIRP for homebuyers. The CIPR regulation 2025 is undoubtedly motivated by consumer welfare, however, its effectiveness is yet to be seen and depends a lot on executive diligence, bureaucratic vigilance, and Judicial Interpretations, which in the past have been very proactive towards consumer welfare, especially homebuyers. Therefore, these amendments are likely to have an overall positive effect on home buyers.
With India’s constantly evolving insolvency ecosystem, the CIRP regulations of 2025 mark a positive policy shift towards both investor confidence and consumer protection. Though their effectiveness is a matter of the future and whether this will result in faster resolutions and better recoveries remains to be seen, the amendments of 2025 undoubtedly signify a progressive approach.
References:
[1] Insolvency and Bankruptcy Code, 2016, § 5(8)(e), No. 31, Acts of Parliament, 2016 (India).
[2] Pioneer Urban Land and Infrastructure Ltd. & Anr. Vs. Union of India & Ors., [2019] ibclaw.in 13 SC
[3]Insolvency and Bankruptcy Code, 2016, § 14(b), No. 31, Acts of Parliament, 2016 (India)..
[4] Alok Sharma Vs. M/s. IP construction Pvt. Ltd. Through RP Anju Agarwal, (2022) ibclaw.in 459 NCLAT