Centre may junk special IBC framework plan for real estate
real estate for effectively granting greater protection to defaulting firms from bankruptcy proceedings is unlikely to feature in the amendments to the Insolvency and Bankruptcy Code (IBC) that the government is firming up, people familiar with the development said.
After extensive deliberations, the government now reckons that such sector-specific mechanisms within the IBC could dilute the very essence of the bankruptcy law and prove to be counter-productive, they told ET. It is expected to amend the IBC after the general election in April-May.
Some flexibilities, however, could be built into regulations from time to time to facilitate easier resolution in real estate, one of the persons said.
In January 2023, the government had sought stakeholders' views on the special insolvency regime for real estate under which the adjudicating authority could, at its discretion, apply the IBC provisions only to insolvent projects, instead of subjecting the entire realty company to bankruptcy proceedings.
This plan was backed by the insolvency regulator. It was assumed to expedite resolution of stress while enabling the debtor (developer) to remain focussed on completing its other projects. Such a move would, in effect, allow defaulting promoters to retain control of the firm during the insolvency resolution.
«After due deliberations and consultations, no special framework for real estate is being planned now,» said one of the persons quoted above.
Another person said every sector has its own peculiarities but that
