IBBI heralds shift in liquidation process, brings relief to home buyers

February 13, 2024

Insolvency regulator IBBI has introduced significant changes to the liquidation process, providing relief for specific home buyers and requiring a key role for a stakeholder consultation committee (SCC), made up of creditors of the company under liquidation, in essential operational aspects overseen by the liquidator.

The latest move of Insolvency and Bankruptcy Board of India (IBBI) is expected to bring confidence to the stakeholders in the liquidation process.

Home buyers with allotted and possessed housing units in stalled projects can now rejoice as their homes are now protected from being included in the “liquidation estate” of such projects. 

Put 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, Association of ARCs in India, said relief has been extended  to homebuyer by exemption of allotted housing under possession from liquidation estate.


The latest amendments in liquidation process regulations have put the creditors of a company in liquidation in the driver’s seat, empowering the SCC to have meaningful say on various issues including early dissolution of the corporate debtor, private sale of its assets and sale of the corporate debtor as a going concern. 

Hitherto, a liquidator had unfettered powers in the decision making around liquidation process. 

Anjali Jain, Partner – Insolvency & Restructuring Practice, Areness, a law firm, said domain of exercise of discretionary powers by liquidators have been bridled through checks and balances in liquidation process. This is especially relating to the scheme of compromise or arrangement under section 230A of Companies Act, 2013, decision making in terms of auctions, fixation of prices, litigations, discovery of sale mechanism etc.

Padmaja Kaul, Partner, IndusLaw, said the latest amendments to the liquidation process regulations embody a pivotal step towards enhanced accountability, transparency, and stakeholder-centricity by increasing the participation of the SCC and thus, fortifying inclusivity and answerability within the process. 

“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,” Kaul said.

Misha, Partner, Shardul Amarchand Mangaldas & Co, said that one of the key changes made by the IBBI is the increased role of the consultation committee that comprises creditors of the corporate debtor.

Mishra said the amended regulations mandate associating consultation committee in all critical areas of functioning of liquidator.  “This reinforces the commercial wisdom and committee-based approach in decision making,” he said. 

Jain said the new amended regulations calling for approvals from SCCs for litigations or other liquidation costs, cost-benefit analysis of various steps taken under the process would bring efficiency in terms of timelines and value addition.

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