A single allottee of a real estate project cannot henceforth initiate corporate insolvency of a real estate developer or a realty company.

Without waiting for the legislative enactment, the Centre has now used the ordinance route to stipulate that a corporate insolvency resolution plan (CIRP) application can only be filed jointly by 100 allottees under the same real estate project or 10 per cent of the total number of allottees under the same real estate project, whichever is less.

This proposal was part of the Insolvency and Bankruptcy Code (second amendment) Bill, which was introduced in the Lok Sabha at the fag end of the just-concluded winter session of Parliament. As the Bill could not be enacted into law, the government has now issued an ordinance.

This ordinance — promulgated on December 28 — has brought in as many as 13 amendments to the Insolvency and Bankruptcy Code (IBC), sources said.

Commenting on the ordinance, Manisha Rawat, an insolvency professional and Head- Compliance of Felix Advisory, said that the introduction of a threshold on the number of allottees needed to move a CIRP application will give a big relief to companies in real estate sector and the number of cases getting filed with NCLT will reduce drastically.

The latest ordinance has also stipulated that where an application for initiating CIRP has already been filed by a financial creditor (real estate project allottee) and has not been admitted by the adjudicating authority (NCLT), that application will have to be modified within 30 days from the commencement of the ordinance.

In case, the applicant fails to file the modified application within the specified 30-day period, such application would be deemed to be withdrawn before its admission.

Now, it is the responsibility of one applicant to form a group of at least 100 allottees of same project and convince them to join him for the application already filed by him within 30 days, which would be a difficult task, according to Rawat.

The other main decision under the ordinance related to ring-fencing of corporate debtors that have gone through the IBC process from criminal liabilities arising from the offences of erstwhile management’s.

The latest ordinance has also now specified that all the licences and government permits sanctioned to the corporate debtor prior to the IBC resolution will stand protected even after the insolvency process is completed.

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