Role of Associations of Allottees in IBC Proceedings
DOI:
https://doi.org/10.7492/r26jxq96Keywords:
Corporate creditors, Insolvency and bankruptcy, Homebuyers, Committee of creditors, Association of allottees, CIRP- Corporate insolvency resolution professional, Insolvency, Builders or promoters or DevelopersAbstract
The Insolvency and Bankruptcy Code (IBC), 2016 has completely transformed the scene of corporate insolvency in India, where real estate
cases, due to the big number of home buyers affected, have turned out to be one of the most complicated areas. The 2018 change was a turning
point in the legislation as it acknowledged allottees as financial creditors and thus conferred them the legal right to partake in the insolvency
process through the Committee of Creditors (CoC). This turning point resulted in the creation of the Associations of Allottees (AoAs), which
have now become the representatives of the homebuyers acted as a one united voice—previously divided and legally incompetent—able to
assert their rights in IBC proceedings. This research aims to delve into the changing role, effectiveness, and challenges of AoAs in real estate
insolvency, while at the same time evaluating their influence on resolution outcomes, project completion, and protection of the consumer's
interest. The study takes a doctrinal methodology supported by some empirical observations and a comparative understanding from
international real estate insolvency models. The outcome indicates that AoAs provide a lot of benefit by bringing in transparency to the process
and better decision making, both collectively and individually, and perhaps even more so—the latter since no accountability is forced on the
part of the former, i.e., the developers and the resolution professionals. However, there still exist coordination issues, and the lack of legal
literacy, along with the delays in the procedures, and inconsistency in the representation by the authorized personnel, which together are
blocking the full potential of the AoAs. The evaluation also implies that while the AoA mechanism strengthens the consumer-oriented
insolvency governance, it also necessitates the structural reforms to boost efficiency and consequently minimize the delays. In a nutshell, the
study puts forward the vital role of AoAs in the IBC setup and that precise and more regulative guidelines are the "calling" in this regard.
