Discussion Paper on IBBI Amendments to Insolvency Resolution Process for Corporate Process Regulations, 2016

Introduction to the Insolvency Resolution Framework

India’s insolvency resolution mechanism underwent substantial transformation with the introduction of the Insolvency and Bankruptcy Code, 2016 [1]. This legislative framework established a time-bound process for resolving corporate insolvency while maximizing asset value for all stakeholders. The Insolvency and Bankruptcy Board of India, operating under Section 240 of the Code, possesses the authority to formulate regulations that govern the resolution process [2]. In February 2024, IBBI introduced significant amendments to the Insolvency Resolution Process for Corporate Persons Regulations, 2016, addressing critical gaps that had emerged during the practical implementation of these rules.

The IBBI amendments came into force on February 15, 2024, following extensive stakeholder consultations through discussion papers released earlier. These modifications reflect lessons learned from high-profile insolvency cases and aim to enhance transparency, accountability, and efficiency in the Corporate Insolvency Resolution Process (CIRP). The changes particularly focus on real estate insolvencies, which have presented unique challenges in the Indian context due to their complexity and the involvement of numerous homebuyers as financial creditors.

Regulatory Background and Legislative Authority

The Insolvency and Bankruptcy Code, 2016 represents Parliament’s consolidated effort to reform India’s fragmented insolvency laws. Prior to this enactment, businesses faced multiple overlapping statutes including the Sick Industrial Companies (Special Provisions) Act, 1985, the Companies Act, 2013, and various recovery mechanisms under different legislation. The Code brought these disparate frameworks under one umbrella while establishing specialized adjudicating authorities in the form of the National Company Law Tribunal for corporate insolvency matters.

Section 240 of the Insolvency and Bankruptcy Code grants IBBI the power to make regulations consistent with the Code’s provisions. This section specifically authorizes the Board to prescribe the manner of making payments under resolution plans, requirements for resolution plan conformity, and procedures for conducting the insolvency resolution process. The 2024 IBBI amendments exercise this regulatory authority to address practical challenges that emerged during the implementation phase, particularly in real estate sector insolvencies where developers often manage multiple simultaneous projects with varying completion statuses and creditor compositions.

Key IBBI Amendments Introduced in February 2024

Separate Banking Accounts for Real Estate Projects

The amendment introduces Regulation 31B, mandating that Resolution Professionals maintain separate bank accounts for each real estate project undertaken by a corporate debtor [3]. This requirement addresses a fundamental problem in real estate insolvencies where funds from different projects were often commingled, making it difficult to determine the exact financial position of individual projects. The segregation of accounts ensures that money collected from allottees of one project cannot be diverted to another, protecting homebuyers’ interests.

This provision requires the Resolution Professional to maintain detailed records showing receipts and expenditures for each project separately. During Committee of Creditors meetings, the operational status of each project must be presented individually, allowing creditors to make informed decisions about whether to pursue project-specific resolution plans or a unified approach for the entire corporate debtor. The amendment recognizes that real estate projects may have different levels of completion, varying creditor interests, and distinct marketability, necessitating tailored resolution strategies.

Enhanced Valuation Transparency

The IBBI amendments introduce substantial changes to Regulation 35 concerning valuation procedures. A new proviso mandates that Resolution Professionals facilitate meetings between registered valuers and the Committee of Creditors before valuation estimates are computed [4]. This interaction allows the CoC to understand the methodology being employed, question assumptions, and provide relevant information that might affect valuation outcomes. The transparency introduced through this mechanism aims to reduce disputes and challenges to valuations, which have historically caused delays in the resolution process.

Furthermore, the amendment requires that valuation reports, including both fair value and liquidation value, be shared with every CoC member under specified conditions. Previously, liquidation values were kept confidential to prevent their misuse in negotiations. The new framework balances the need for confidentiality with the CoC’s right to make informed decisions. Additionally, Regulation 36(2)(ka) allows fair value to be disclosed in the Information Memorandum, enabling prospective resolution applicants to make more informed bids based on realistic asset valuations rather than working with incomplete information.

Project-Specific Resolution Plans

The IBBI amendments clarify that after due examination, the Committee of Creditors may direct the Resolution Professional to invite separate resolution plans for individual real estate projects or groups of projects [5]. This flexibility acknowledges that in complex real estate cases, a single resolution plan for the entire corporate debtor may not serve the best interests of all stakeholders. Different projects may attract different investors based on their location, completion status, and market demand.

This provision enables more focused resolution strategies where completed or near-completed projects can be quickly resolved and handed over to buyers, while projects in earlier stages of development can be dealt with separately. The approach potentially increases the overall recovery for creditors by allowing market forces to determine the optimal buyer for each asset rather than forcing a single resolution applicant to acquire all projects regardless of their expertise or interest in specific locations or property types.

Monitoring Committees for Resolution Plan Implementation

Regulation 38 has been amended to introduce the concept of monitoring committees for overseeing resolution plan implementation [6]. The Committee of Creditors now possesses the discretion to constitute such a committee comprising the Resolution Professional, another insolvency professional, or any other suitable person. This mechanism addresses concerns about resolution plans being approved but poorly implemented, leading to value erosion post-approval.

The monitoring committee serves as an oversight body ensuring that the successful resolution applicant adheres to the commitments made in the approved plan. Where the Resolution Professional continues as a monitoring committee member, their monthly fee cannot exceed what they received during the CIRP, preventing excessive costs from burdening the resolved entity. This provision balances the need for continuity and expertise with cost considerations, ensuring that monitoring does not become financially prohibitive for the revived corporate debtor.

Continuation of Resolution Activities During Extension Applications

The IBBI amendments insert a clarification under Regulation 40 addressing a practical issue that emerged during implementation [7]. When a Resolution Professional files an application seeking an extension of the CIRP timeline before the Adjudicating Authority, there was ambiguity about whether resolution activities should continue or be suspended pending the Authority’s decision. The amendment clarifies that the Resolution Professional must continue discharging their responsibilities during this period, preventing artificial delays and ensuring that the resolution process maintains momentum even while procedural matters are pending before the tribunal.

This clarification prevents resolution applicants and creditors from exploiting procedural gaps to stall the process or gain strategic advantages. It ensures that the underlying objective of time-bound resolution remains paramount, and administrative or procedural matters do not derail the substantive progress of the insolvency resolution process.

Judicial Interpretation and Case Law Development

The Jaypee Kensington Landmark Judgment

The Supreme Court’s decision in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd. [8] significantly influenced the amendment process. This three-judge bench judgment, delivered in March 2021, addressed fundamental questions about the approval and modification of resolution plans, particularly concerning dissenting financial creditors’ rights. The Court held that dissenting financial creditors cannot be compelled to accept payment in forms other than cash, such as equity or land parcels, even if such payment modes are acceptable to assenting creditors.

The judgment emphasized that while the Committee of Creditors possesses substantial commercial wisdom in approving resolution plans, the Adjudicating Authority retains the jurisdiction to disapprove plans that fail to meet statutory requirements. However, the Authority cannot modify plans approved by the CoC; instead, it must remand the matter back to the CoC for reconsideration if deficiencies are identified. This principle reinforces the commercial primacy of the CoC while maintaining judicial oversight to ensure compliance with the Code’s mandatory provisions.

The Jaypee decision’s impact extends to the treatment of dissenting financial creditors in resolution plans. Section 30(2)(b) of the Code requires that dissenting financial creditors receive at least the amount they would receive under liquidation, paid in priority to assenting creditors. The Court interpreted this provision strictly, establishing that dissenting creditors must receive cash payments rather than being forced to maintain an association with the corporate debtor through equity or other securities. This interpretation influenced subsequent amendments clarifying the payment mechanisms for dissenting creditors.

RBL Bank Limited v. Sical Logistics Limited Decision

The National Company Law Appellate Tribunal’s ruling in RBL Bank Limited v. Sical Logistics Limited [9] addressed the precise calculation and payment methodology for dissenting financial creditors when resolution plans involve staggered payments. The tribunal held that dissenting creditors are entitled to receive their proportionate share based on the total resolution plan value rather than merely the liquidation value, and that this payment must occur on a pro-rata basis in priority to assenting creditors at each payment stage.

The case involved a resolution plan where RBL Bank, as a dissenting creditor holding 9.88% voting share, initially received payment calculated on only a portion of the total plan value. The NCLAT corrected this interpretation, clarifying that “priority in payment” means dissenting creditors must be paid first whenever the successful resolution applicant releases funds to financial creditors. If payments occur in installments, dissenting creditors receive their pro-rata share from each installment before assenting creditors. This interpretation prevents resolution applicants from structuring payment schedules in ways that disadvantage dissenting creditors despite the statutory protection provided under Section 30(2)(b).

The judgment reinforced principles established in the Jaypee case while providing operational clarity on payment mechanics. The IBBI subsequently amended Regulation 38 to align with these judicial interpretations, specifying that in cases of staggered payments, dissenting financial creditors must be paid pro-rata and in priority to assenting creditors at each stage. This regulatory response to judicial pronouncements demonstrates the evolving nature of India’s insolvency framework, where regulations adapt to address ambiguities identified through litigation.

Impact on Real Estate Sector Insolvencies

The IBBI amendments reflect special consideration for real estate sector characteristics, where corporate debtors often manage multiple projects simultaneously with varying creditor bases and completion levels. The requirement for separate bank accounts and the provision for project-specific resolution plans acknowledge that treating all projects of a real estate developer as a single unit may not serve stakeholder interests optimally.

Real estate insolvencies in India have involved thousands of homebuyers who gained status as financial creditors following amendments to the Code. These homebuyers often have interests limited to specific projects rather than the developer’s entire portfolio. The amendments enable resolution strategies that can deliver completed units to buyers quickly while allowing more time for partially completed projects. This flexibility potentially increases overall recoveries while reducing the social impact of prolonged insolvency processes where families await possession of homes they purchased years earlier.

The enhanced oversight through monitoring committees also addresses concerns specific to real estate resolutions, where the successful resolution applicant must complete ongoing construction projects. Monitoring committees can ensure that construction progresses according to committed timelines and that project-specific funds are utilized appropriately. This ongoing supervision mechanism attempts to prevent scenarios where resolution applicants acquire projects at favorable valuations but subsequently fail to fulfill completion obligations, leaving homebuyers in continued distress.

Operational Implications for Stakeholders

For Resolution Professionals

Resolution Professionals face increased administrative responsibilities under the amended regulations, particularly in real estate cases requiring multiple bank accounts and separate project tracking. The requirement to facilitate valuer-CoC meetings demands additional coordination and time management. However, these additional obligations come with enhanced clarity about continuing responsibilities during extension applications and defined roles in potential monitoring committees.

The amendments require Resolution Professionals to develop more sophisticated project management capabilities, especially when handling multi-project real estate insolvencies. They must maintain separate books of accounts for each project, prepare project-wise operational status reports, and potentially evaluate and invite project-specific resolution plans. This increased complexity may necessitate larger teams and specialized expertise in real estate sector operations.

For Committee of Creditors

The amendments empower the Committee of Creditors with enhanced oversight and decision-making authority. The introduction of monitoring committees allows financial creditors to maintain involvement beyond resolution plan approval, addressing concerns about implementation failures. The enhanced transparency in valuation processes enables more informed decision-making about resolution plan viability and pricing adequacy.

However, these expanded powers come with corresponding responsibilities. CoC members must actively participate in valuation methodology discussions, make informed decisions about constituting monitoring committees, and potentially approve project-specific rather than unified resolution strategies. This demands greater time commitment and expertise from CoC members, particularly those representing multiple creditors or creditor classes.

Challenges and Future Considerations

Despite the amendments’ positive intentions, several challenges merit attention. The requirement for separate bank accounts may increase administrative complexity and costs, particularly for large real estate developers with numerous projects. There remains ambiguity about how strictly projects must be segregated when they share common infrastructure or amenities.

The discretionary nature of monitoring committees may lead to inconsistent practices across different insolvency cases. Some CoCs may constitute elaborate monitoring structures while others opt for minimal oversight, potentially creating disparities in resolution plan implementation quality. The absence of detailed guidelines about monitoring committee functioning, reporting requirements, and intervention powers may require further regulatory clarification through subsequent amendments or IBBI circulars.

The project-specific resolution plan provision, while flexible, could complicate matters when projects share common assets, branding, or corporate infrastructure. Questions about allocating corporate-level liabilities across project-specific plans and determining fair distribution of proceeds when different projects attract varying per-unit recoveries remain areas requiring careful consideration during implementation.

Conclusion

The February 2024 amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 represent a significant evolution in India’s insolvency framework. These changes address practical challenges identified during implementation while incorporating lessons from judicial pronouncements in landmark cases. The enhanced focus on real estate sector particularities, increased transparency requirements, and flexibility in resolution strategies reflect a maturing regulatory approach that balances creditor interests, debtor rehabilitation prospects, and broader economic considerations.

The amendments demonstrate IBBI’s responsiveness to stakeholder feedback and willingness to adapt regulations based on ground realities. As implementation proceeds, further refinements may emerge from practical experience and additional judicial interpretations. The success of these amendments will ultimately be measured by whether they achieve their stated objectives of increasing resolution possibilities, enhancing plan values, and enabling timely resolutions while maintaining fairness and transparency throughout the process.

References

[1] Ministry of Law and Justice. (2016). The Insolvency and Bankruptcy Code, 2016. Government of India. https://www.indiacode.nic.in/handle/123456789/2154 

[2] IBC Laws. (n.d.). Section 240 of IBC – Power to make regulations. https://ibclaw.in/section-240-power-to-make-regulations/ 

[3] LiveLaw. (2024, February 16). IBBI Amends CIRP Regulations W.E.F. 15th February 2024. https://www.livelaw.in/ibc-cases/ibbi-amends-cirp-regulations-wef-15th-february-2024-251769 

[4] Argus Partners. (2024). IBBI amends the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. https://www.argus-p.com/updates/updates/ibbi-amends-the-ibbi-insolvency-resolution-process-for-corporate-persons-regulations-2016/ 

[5] Corner Office Journal. (2024, February 16). What Are IBBI’s Key Changes in Resolution Process Norms For Corporate Persons? https://www.cornerofficejournal.com/what-are-ibbi-s-key-changes-in-resolution-process-norms-for-corporate-persons 

[6] Lexology. (2025, June 26). Recent amendments to Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. https://www.lexology.com/library/detail.aspx?g=22b2c770-1b57-4f19-b307-b2ef49d850a8 

[7] Argus Partners. (2023). Amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. https://www.argus-p.com/updates/updates/amendments-to-the-insolvency-and-bankruptcy-board-of-india-insolvency-resolution-process-for-corporate-persons-regulations-2016/ 

[8] Indian Kanoon. (2021). Jaypee Kensington Boulevard Apartments vs NBCC (India) Ltd on 24 March, 2021. https://indiankanoon.org/doc/123645104/ 

[9] LiveLaw. (2025, April 5). Dissenting Financial Creditors Are Entitled To Receive Payments On Pro-Rata Basis: NCLAT. https://www.livelaw.in/ibc-cases/dissenting-financial-creditors-are-entitled-to-receive-payments-on-pro-rata-basis-of-resolution-plan-value-rather-than-liquidation-value-nclat-288523