There has been a steady increase in the number of corporate insolvency resolution process (CIRP) cases over the last four years and of the total 4,008 cases since inception, real estate accounts for nearly 20 per cent share or approximately 793 cases as of September 2020. Subsequently, over 50 per cent have already been closed during July-September, while 395 remain for which banks and operational creditors are seeking resolution.
The quarterly trend suggests a steady improvement in the total percentage of cases resolved -- out of the total admitted 209 CIRPs in real estate, just 33 per cent were closed, as on Jul-September, 2018. "Thus, the bankruptcy reform has sought to rebalance the rights of lenders and shareholders of defaulting firms so that the fear of loss of ownership and management control would force the promoters in deciding a rescue package. The buyers and creditors today may have avenues of seeking legal intervention and relief to secure their debts and investments liberally from these bodies, the solutions need to be expedited and implemented," said Shobhit Agarwal, MD & CEO, ANAROCK Capital.
Since the inception of the provisions for CIRPs on December 1, 2016, a total of 4,008 CIRPs across various sectors had commenced by September 2020. Of these, 473 have been closed on appeal or review or settled, 291 have been withdrawn, 1,025 have ended in orders for liquidation and 277 have ended in approval of resolution plans. Currently, 1,942 CIRPs remain, for which banks and operational creditors are seeking resolution.
The enactment of the Insolvency and Bankruptcy Code in 2016, (IBC) along with RERA ushered in a new era of regulation for the Indian real estate sector. Both these reforms strengthened the hand of homebuyers, giving them alternate forums to get justice. Homebuyers can now file claims before consumer courts under RERA and before the National Company Law Tribunal (NCLT) by invoking IBC, he added. In short, homebuyers now have the same powers as banks and institutional creditors. Prior to this amendment, homebuyers' recovery status was vague at best. Only banks and other lending financial institutions had any real claim or right of recovery in a developer's assets when liquidated as part of the bankruptcy process, Agarwal further pointed out.
As of September, 2020, nearly 1,442 cases of the 1,942 ongoing CIRPs had exceeded the 270-day timelines, while 349 cases exceeded 180 days. However, in 2020, these timelines were relaxed due to the COVID-19 outbreak wherein the nationwide lockdown period has been excluded while calculating the overall number of 330 days.
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