'IBC to remain agnostic despite calls for sector -specific exclusions''

Copyright © HT Digital Streams Limit all rights reserved. Although more fencing of specific projects under Rera could be done, the project-wise debt solution will not be pursued under IBC. (Mint) Summary The government has decided to keep the insolvency and bankruptcy code a uniform, sector-magnostic legislation, and reject the calls for a specific insolvency framework for the property sector. New Delhi: India’s insolvency resolution framework will remain sector-magnostic, as the government has assessed that it is not practical to provide special dispensations to specific sectors such as real estate, according to two people informed about government reservations. Contrary to expectations, the amendments to the Insolvency and Bankruptcy Code (IBC) that the government instituted in the Monsoon session in Parliament did not include a project-specific insolvency regime for real estate. In 2023, an expert committee erected by the Ministry of Housing and Urban Affairs to look at set real estate projects, that the registration requirement of individual projects with real estate regulatory authorities should be strictly implemented as it helps the shoulder resolution. The committee, led by the former G20 Sherpa Amitabh side of India, also emphasized the maintenance of project-wise Escrow accounts, which will also help in this regard. Although more fencing of specific projects under Rera could be done, the project-wise debt solution will not be pursued under IBC. “IBC is not a sector -specific legislation. Making out cuts for specific sectors can make the statute more complicated. Giving a specific real estate dispensation is not the best thing to do,” one of the two people quoted above. In addition, this will give rise to similar claims from other sectors. The application of IBC provisions to specific real estate projects of a developer will serve a double purpose. ‘First, the stressed projects, which caused the corporate debtor’s insolvency, can be resolved separately. The debtor can continue to focus on other projects where it has not failed. Second, an appropriate custom resolution can be achieved based on the status of the real estate project and the objectives of the businesses concerned, which would include a 2023 discussion, while the businesses in a 2023 discussion would include feedback. Rera for brokers experts pointed out that the dependence on the 2016 Regulation and Regulation Regulatory Act (RERA) as the Primary Framework for Project Level Level oms fence is both legal and practical, as Rera already instructs separate bank accounts for each project, regulatory supervision on the completion of the project and the use of the IBC use. Rera complements the IBC by protecting project level interests, without the IBC itself deviating from its framework on corporate debtor, said Yogendra Aldak, executive partner at Lakshmikumaran and Sridharan attorneys. “One of the fundamental pillars of IBC, since its execution in 2016, was the sector-magnostic nature, which is a united and comprehensive insolvency framework that applies in all industries,” says Yogendra Aldak. “This principle ensures equal treatment of creditors and debtors, regardless of the sector, and provides predictability and consistency in insolvency outcomes. It also helps avoid fragmentation or confusion that can result from sector-specific exceptions,” Aldak added. The government’s resistance to sector-specific real estate exclusions protects the integrity, flexibility and predictability of the IBC framework, he said, pointing out that developers usually finance projects through complicated cross-collateralization structures involving cash flow, guarantees, ordinary borrowers and security interests. Better coordination “Therefore, if the project-wise insolvency resolution is allowed for the property sector, it would undermine the collective nature of the resolution process by fragmenting the debtor’s estate and the ability of creditors to recover fees,” says Aldak. A fragmented process can also recover home buyers from cross -project or deprive guarantees, he said. According to Anisha Jhunjhunwala, senior consultant-IBC at NPV Insolvency Professionals PVT, this is the right approach. Ltd. “The strength of the bankruptcy code lies in its uniform application in the industries, which ensures predictability and avoids regulatory arbitrage. The creation of sector -specific exclusions, such as the project -wise insolvency for real estate, would have added the complexity of the financial links across the portfolio of a developer,” Jhunjhunwala added. Instead, protections at the project level are better addressed under Rera, which already instructs separate accounts for each project, Jhunjhunwala said. “What is needed now is a stronger coordination between IBC and Sectoral Regulators such as RERA, so that sectoral details are addressed without diluting the integrity of the insolvency framework. The IBC is designed as a single playbook for all industries – that’s what creditors and investors give confidence,” she said. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #insolvency and Bankruptcy Code #News #india #insolvensie Code Read next story