Six years of IBC - impact on Real Estate sector

Six years of IBC 2016 www.infralive.com 45 InfraLIVE January 15, 2023 b u t t h e p r o c e d u r e f o r t h e homebuyers/ allottees is novel with restrictions and its efficacy is yet to be seen. While the system is tested against practical realities, the allottees who have deposited their life-long savings/money should not be left with an uncertain outcome/ future. The delays in most cases have been caused by repeated judicial interventions. Timelines in the IBC have been rarely adhered to, and attempts to fix deadlines under it have been repeatedly thwarted by courts, with Supreme Court reading down the word “mandatory" in the 330-day timeline asmere advisory innature. In the real estate sector, the IBC law has seen significant policy confusion. Despite several amend- ment s and po l i cy f l i p- f l ops , homebuyers have largely been on the fringes in the CIRPs of real e s t a t e c o m p a n i e s . T o d a y , homebuyers are reported to have difficulty in reaching the threshold of 10 per cent, or 100 homebuyers. However, such a threshold is necessary to ensure that projects are not stalled at the behest of a single disgruntled homebuyer, given the number of stakeholders in some of these cases. Conclusion and Recommen- dations Undoubtedly, IBC's report card in the real estate sector is not as rosy as one would have expected it to be. Further, IBC is not the best mecha- nism to resolve diverse grievances (completion of real estate projects, r e f u n d o f d e p o s i t s e t c ) o f homebuyers, and authorities such as RERA may be better suited for the purpose. Therefore, the lawmay need to be tweaked to create a balance between the rights of homebuyers under RERA and the rights of creditors under IBC by allowing the RERAs to order for CIRP of the real estate develop- ers/companies and ensure time bound completion of Resolution plans or Liquidation. Additionally, each RERA must have atleast a member with the legal background. This is an urgent necessity because real estate sector remains the second biggest sector in which IBC petitions were filed. Sadly, not many CIRPs in the real estate sector have been resolved either through completion of resolution plans or liquidation in last six years. Further, one of the issues which need to be prescribed in law is seizure of ill-gotten/ misappropri- ated/ diverted funds/ assets of the promoters of the CDs under CIRP in IBC and delinquent promoters in RERA Act and their time-bound (Say 60/90 days) monetisation through disposal of seized illegal assets by e-auction. Secondly, it should not be enough that only misappropriated/ diverted funds/ assets to tax-haven foreign coun- tries are traced and recovered but exemplary/deterrent punishment to the culprits should also be given in a time-bound period through constitution of special courts for such economic offenses of misap- propriating/ diversion of funds and making lives of hundreds of thousands of consumers and their families pathetic and miserable. Th i r d l y , t h e b e s t p r a c t i c e s employed by the Apex court in case of a CD should be included in the law so that they are followed in o t h e r s i m i l a r c a s e s b y NCLTs/RERAs. Fourthly, financial creditors like banks, financial institutions should invariably closely monitor the utilisation of loans/ funds to ensure that the corporate debtors/ real estate developers use the funds/ credit for the purposes for which they have been sanctioned and responsibility should also be fixed on bank officials for collusion with develop- ers/ CD, if any. Fifthly, it should be ensured that the promoters/ CDs invest/ raise adequate capital/ stake in the business/ company in order to undertake the real estate projects. The Author is a retired DG of the C&AG of India. He was a member of RERA, Bihar during April, 2018 to December 2021. His views are personal. Police agencies, in view of criminal breach of trust, criminal conspiracy, cheating etc found to have been com- m i t t e d b y t h e p r omo t- ers/directors/KMPs; 3. Role of MD, CFO, statutory auditors, KMPs and their family members investigated a nd c l o s e l y mo n i t o r e d , immediate seizure of their disproportionate assets and monetisation of assets by e- auction; 4. Payment of outstanding dues to Noida/ Greater Noida Authorities stopped until the projects are completed; 5. R e f u n d o f B a n k l o a n s / Payment to Banks/ financial institutions stopped until the projects are completed; 6. Monetisation of assets of the promoter companies through e-auction of land/ assets under supervision of independent agencies/ impartial authori- ties; 7. Engagement of central/ state PSUs to complete the remain- ing projects; 8. Oversight of retired SC/ High Co u r t J ud g e s / emi n e n t personalities over implemen- tation of resolution activities; 9. Go I appo i n t ed boa r d o f directors to take over the management of delinquent r e a l e s t a t e d e v e l o p e r s / companies; 10. Appo i n tmen t o f Ami cu s Curiae / Receiver to oversee the resolution plan/ liquida- tion. It is therefore necessary that all these best practices employed by the Supreme court in course of more than hundreds of hearings in last 5-6 years in these cases may be considered for inclusion in the IBC andRERAwith suitable caveats, as far as practicable, so that delin- quent developers face full might of the law and harassed homebuyers are able to save their life-savings and salvage/ get their flats/ funds. That is not to say that IBC has failed in addressing the problems,