Seeking to make the insolvency regime more equitable and litigation-proof, the Insolvency and Bankruptcy Board of India (IBBI) has proposed sweeping reforms that would virtually guarantee every homebuyer a share in the resolution process — even if they haven’t filed claims.

The regulator has also moved to tighten disclosure norms by mandating fuller reporting of items such as trade receivables, JDA rights and assets under enforcement attachment, while proposing wider creditor representation in cases where no financial institution sits on the CoC, according to a report by The Financial Express.

Further, it is proposed that in a corporate insolvency process where no regulated financial institution is representing the Committee of Creditors, the resolution professional (RP) shall invite top five operational creditors to attend CoC meetings as observers.

In a new discussion paper, the IBBI noted that in several real estate insolvency cases, homebuyers whose details are reflected in the company’s books of account do not file claims within the prescribed time period. Hence, such homebuyers get excluded from the resolution plan. However, such exclusions cause delays in the resolution plan and result in litigation when the “non-filing homebuyers” subsequently approach the RP seeking their inclusion.

The IBBI has proposed that the IM – which captures the claims of all creditors – shall include the details of all allottees irrespective of whether such allottees have filed claims. The resolution plan shall provide for treatment of such allottees, the paper said.

Experts said that this is an “important protection” for homebuyers. “The IBBI is recognising homebuyers as an essential creditor class. This can substantially reduce litigation post-resolution, bring more fairness, and stabilise the resolution process. This is also crucial for the reason that for many homebuyers, CIRP (corporate insolvency resolution process) has been their only pathway to recover or salvage their investments. Hence, better representation can lead to more just outcomes,” said Yogendra Aldak, executive partner at Lakshmikumaran & Sridharan Attorneys.

The proposal is the biggest step to buttress the rights of homebuyers (real estate allottees) under the regime, after the 2016 amendment to the Insolvency and Bankruptcy Code (IBC) that elevated them to the status of financial creditors, from that of consumers or unsecured claimants.

“This amendment (proposed by IBBI) is welfare-oriented because homebuyers are not a cohesive group and are not even aware of the procedure to be followed to ensure that their claim is recognised and admitted. This amendment will certainly help the homebuyer category in general, and in future may be extended to other small creditors who have not filed claims but whose details are reflected in the corporate debtor’s books,” said Durgesh Khanapurkar, partner at Desai & Diwanji.

Though Aldak said that IBBI should also issue guidelines clarifying permissible variation in treatment between claim-filing and non-filing allottees.

The board noted that critical details such as trade receivables, JDA rights and information about assets which are under attachment by enforcement agencies (like Enforcement Directorate, Income Tax Department, or other statutory authorities) are either inadequately captured or entirely omitted from the IM. It proposed to strengthen the disclosure requirements by expressly mandating inclusion of such information in the IM.