Strengthening CIRP Transparency: IBBI Proposes Landmark Reforms on Allottee Disclosure, Asset Reporting, CoC Oversight, and Liquidation Justification
- REEDLAW
- Nov 19
- 5 min read
Updated: Nov 20
REEDLAW Legal News Network reports: In a pivotal regulatory development, the Insolvency and Bankruptcy Board of India (IBBI), through its Discussion Paper dated 17 November 2025, has proposed landmark reforms to enhance transparency, accountability, and uniformity in the Corporate Insolvency Resolution Process (CIRP). Building upon judicial precedents and persistent stakeholder concerns, the Board has identified systemic gaps relating to allottee disclosure, asset reporting, CoC oversight, and unreasoned liquidation decisions, recommending comprehensive regulatory amendments to strengthen discipline and safeguard value maximisation under the IBC framework.
The Discussion Paper highlighted that the absence of uniform disclosures, inconsistent treatment of allottees, inadequate transparency in CoC functioning, and instances of liquidation being recommended despite viable plans have collectively weakened CIRP effectiveness. Drawing guidance from judgments of the Supreme Court and NCLAT, including Amit Nehra and Another v. Pawan Kumar Garg and Others, REEDLAW 2025 SC 09631 and Puneet Kaur v. K.V. Developers Private Limited and Others, REEDLAW 2022 NCLAT Del 06501, the IBBI emphasised the need for statutory mechanisms to ensure comprehensive IM disclosures, equitable treatment of homebuyers, observer participation where CoCs lack financial institutions, and mandatory recording of reasons when opting for liquidation. These reforms aim to create a more predictable, accountable, and litigation-resistant insolvency ecosystem.
Drawing upon judicial pronouncements, lessons from real-world implementation, and concerns repeatedly highlighted by stakeholders, the Insolvency and Bankruptcy Board of India (IBBI) has identified four systemic gaps that undermine value maximisation, fairness, and discipline in CIRP. The Discussion Paper proposes targeted amendments to the CIRP Regulations, focusing on disclosure enhancement, better protection for allottees, strengthened checks in the Committee of Creditors (CoC) functioning, and mandatory reasoning for liquidation decisions despite viable plans.
I. Inclusion and Protection of Allottees: Eliminating Gaps in Real Estate Insolvencies
A core reform proposed by the IBBI addresses the recurring difficulties faced by homebuyers who do not file claims during CIRP despite their details being clearly recorded in the corporate debtor’s books. At present, the Information Memorandum (IM) reflects only formally submitted claims, leaving such genuine allottees excluded from the resolution plan.
This gap has led to significant hardship at the implementation stage, where non-filing homebuyers subsequently seek recognition, causing delay, uncertainty and avoidable litigation. The NCLAT in Puneet Kaur v. K.V. Developers Private Limited and Others, REEDLAW 2022 NCLAT Del 06501 and the Supreme Court in Amit Nehra and Another v. Pawan Kumar Garg and Others, REEDLAW 2025 SC 09631 have already emphasised that claims of recorded allottees must be included in both the IM and the resolution plan.
Proposed Regulatory Amendments
The IBBI proposes that:
The IM must mandatorily include details of all allottees, regardless of claim filing.
Resolution plans must include a specific treatment mechanism for such allottees by inserting a new Regulation 38A.
This change seeks to ensure equitable treatment, prevent litigation surprises, and reflect the true liability landscape in real estate CIRPs.
II. Enhanced Disclosure Standards: Receivables, JDAs & Attached Assets
The Discussion Paper highlights a critical shortfall: incomplete and inconsistent disclosures in the Information Memorandum, particularly concerning:
receivables,
joint development agreements (JDAs), and
assets under attachment by authorities such as the ED or the Income Tax Department.
In many cases, JDA-related rights—despite being recognised as “assets” by the Supreme Court in Victory Iron Works Limited v. Jitendra Lohia and Another, REEDLAW 2023 SC 03511—are not captured in the IM. Similarly, non-disclosure of attached assets results in misinformation, distorted valuations, and adverse bidder participation.
Proposed Regulatory Amendments
To ensure a true and fair financial picture, Regulation 36(2) will be strengthened to include:
All receivables (trade, contractual, inter-corporate);
All JDAs and co-development agreements with rights and obligations;
All assets under attachment with details of authority, nature of attachment and status.
This reform directly addresses information asymmetry, ensuring RPs and CoCs evaluate the corporate debtor with clarity and completeness.
III. Safeguards When CoC Lacks a Financial Institution Member
The IBBI identifies a situation where CIRP decisions can become vulnerable: in cases where no financial institution is present in the CoC, and a single unregulated financial creditor holds more than 66% of the voting shares. Such dominance may compromise the quality of decision-making and open doors to arbitrary choices.
Proposed Solution
A new Regulation 16E will require:
The RP is to invite the five largest operational creditors as observers to CoC meetings.
These observers will receive notice, agenda, and minutes, and may participate in deliberations without voting rights.
Minutes must reflect observers’ comments and all decision-related reasons.
This adds a crucial layer of transparency and accountability, ensuring key decisions are not made in a vacuum dominated by one creditor.
IV. Mandatory Reasoned Decisions When Recommending Liquidation
The Paper notes that several CoCs have recommended liquidation even when compliant, viable plans have been received, sometimes exceeding the liquidation value. However, CoC minutes often fail to record why such liquidation was preferred.
Regulation 40D at present only states that considerations “may” be recorded. The IBBI now proposes making it mandatory.
Proposed Regulatory Amendment
Where a compliant plan above liquidation value is received, but the CoC still opts for liquidation:
The CoC must record detailed reasons in minutes; and
These must accompany the RP’s liquidation application before the Adjudicating Authority.
This reform promotes reasoned decision-making, protects value maximisation principles, and prevents hindsight litigations over unreasoned liquidation choices.
V. Public Participation and Timeline for Comments
In line with its consultative approach, the IBBI has invited public comments on the Discussion Paper and the proposed draft regulations. The last date for submission is 8 December 2025, and comments may be submitted through the dedicated interface on the IBBI website.
Stakeholders—ranging from CDs, creditors, IPs, IPAs, homebuyers, academics, and investors—may provide both general and proposal-specific comments.
Conclusion
The IBBI’s Discussion Paper represents one of the most comprehensive regulatory reform initiatives since the inception of the IBC. By focusing on greater transparency, disciplined decision-making, complete disclosures, and better protection for homebuyers, the proposals strengthen the CIRP ecosystem and align it more closely with judicial expectations and stakeholder realities.
If implemented, these reforms will significantly reduce litigation, ensure fairness across classes of creditors, and enhance the credibility and efficiency of India’s insolvency framework.
Download the Discussion Paper for study and comments:
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