Gap between homebuyers’ hope and commercial viability of resolution often leads to mistrust: Amit Karia

Amit Karia, a Mumbai-based insolvency professional, has handled a number of complex corporate insolvency resolution processes (CIRPs) over the past few years. Out of 10 CIRPs, he managed to get resolution in five of them – four of which are related to real estate companies. Karia has demonstrated a remarkable ability to achieve swift resolutions in CIRPs. The average time for successful resolutions under his guidance is 225 days against overall average of 340 days.  We recently spoke to Amit Karia, who is also a member of IPE Incorp Restructuring Services LLP. Here’s an edited excerpt:

You have handled some of the challenging CIRP cases of real estate companies. What are the major challenges faced in resolution when it comes to real estate projects?

Yes, I have handled multiple CIRPs in the real estate sector, and they undoubtedly come with unique and complex challenges. One of the most significant challenges is dealing with homebuyers. While they are classified as financial creditors under the Code, in reality, they are individuals or families who have invested their life savings into a home – not just money into a company. This emotional element adds pressure to handle the process with greater sensitivity and transparency.

Another major issue is the disorganized state of documentation and asset ownership. It is common to find land parcels entangled in multiple agreements – joint ventures, mortgages, or even legal disputes. Just determining what actually forms part of the assets can take considerable time. For instance, in one of the cases I have handled, the real estate project was held in the name of a partnership firm in which the corporate debtor held a 99.9% stake, while the remaining 0.1% was held by the suspended director. In the absence of financial records for the partnership firm, there were significant challenges in valuing both the project and the corporate debtor. In another matter, the sole asset of the corporate debtor was development rights over a project having several homebuyers, with the land-owners claiming that the development agreement had been terminated by them, before the initiation of CIRP of the corporate debtor. The unilateral termination had to be challenged to protect the interest of the corporate debtor and also the stakeholders including homebuyers.

Financing is another hurdle. Most projects are stuck midway, and it is difficult to attract resolution plans that are both viable and acceptable to all stakeholders. Additionally, legal and regulatory overlaps – particularly with RERA and ongoing litigations – often delay or further complicate the process.

Despite these challenges, what makes these cases truly worth resolving is the potential impact. When a stalled project gets revived and homebuyers finally receive possession, it feels like a real contribution – something that goes beyond numbers and compliance.

In cases of real estate CIRPs, how difficult it is to meet the homebuyers’ expectations?

Meeting homebuyers’ expectations in real estate CIRPs is perhaps one of the most sensitive and challenging aspects of the process. The difficulty begins with the fact that most homebuyers are not just financial creditors – they are end-users. Many have taken home loans, paid EMIs for years, and are emotionally invested in finally receiving possession of their homes. Naturally, they expect timely delivery, full refunds, or at least some tangible outcome, which may not always be achievable within the framework of a stressed asset.

The IBC process, however, is designed primarily for insolvency resolution, not consumer redressal. This gap between what homebuyers hope for and what the law or commercial viability can deliver often leads to disappointment or mistrust.

What further complicates the situation is the limited value remaining in many of these projects — construction is often incomplete, project assets may be inadequate, or legal disputes may be pending. Crafting a resolution plan that is acceptable to both homebuyers and financial institutions, under such constraints, becomes a delicate balancing act.

That said, transparent and continuous communication with homebuyers can make a significant difference. Engaging with them through Committee of Creditors (CoC) representatives, addressing their concerns in separate meetings, and managing expectations in a realistic (not just legal) manner can go a long way in maintaining trust and facilitating the resolution process. One practical approach is to allow a couple of homebuyers to participate as ‘Passive Observers’ in CoC meetings, in addition to the Authorised Representative. This fosters transparency and reinforces the credibility of the process.

In many real estate CIRPs, we also encounter individuals claiming to be homebuyers based on documents such as Expressions of Interest (EOIs), where only a nominal token amount was paid, without a registered allotment or any substantial financial commitment. The challenge here is that not all such claimants are genuine end-users. Some may be investors or speculators attempting to establish a stake in the insolvency process — often years after the original arrangement — without having made any real progress toward a purchase. Including such claims without proper scrutiny can distort the CoC’s voting structure and dilute the rights of genuine homebuyers who have made significant payments. If such claims need to be rejected, it should be done empathetically. Many of these individuals may genuinely feel wronged or misled, even if they do not qualify as financial creditors under the law. Therefore, the rejection communication must be clear, well-reasoned, and supported by relevant legal provisions or precedents.

In the case of Rite Builtec, you had to address the interests of 750+ slum dwellers awaiting rehabilitation for over a decade. Tell us something about your interaction with the slum dwellers, who might be looking at you with a lot of hope?

The Rite Builtec case was particularly challenging because it was not just about numbers or legal procedures — it was about more than 750 families who had been waiting for rehabilitation for over a decade. In the initial days of the CIRP, there was a great deal of anger, frustration, and even hostility. These families had been promised homes for years, but nothing had materialized. Naturally, they were deeply distrustful of another process.

I understood early on that staying in my office and sending notices would not make a difference. Hence, I went on the ground and held multiple meetings with the affected families. During these interactions, I spent time not only listening to their grievances but also explaining the provisions of the Code and what their rights were under it. I guided them through the process of filing claims as ‘Other Creditors’ and helped them understand how to represent their interests in a structured and legally sound manner. It was important for them to realise that they were not just bystanders — they were legitimate stakeholders in the resolution process.

Initially, the interactions were difficult due to lack of faith. But with consistent engagement and open communication, things began to change and the trust that had been missing started to build. I believe they saw that I was not there just to follow procedure, but to ensure the process was fair, inclusive, and transparent. It was never about sitting in an air-conditioned office and making decisions in isolation – it was about being on the ground, hearing them out, and showing them that they mattered.

That transformation — from initial resistance to eventual trust and cooperation — was one of the most rewarding experiences of my professional journey. It reinforced a key lesson: while legal expertise is critical, empathy and effective communication are equally essential when dealing with human-centred issues like these.

In cases where development authorities MMRDA, etc are involved, how complex the situation becomes?

The involvement of development authorities such as MMRDA can add a significant layer of complexity to the resolution process. Even if these authorities do not formally participate by filing claims, it is essential to keep them informed at every stage. Tracking development charges and dues is critical, as these obligations are sometimes overlooked but can cause serious delays or even derail progress if not addressed in a timely manner. I make it a point to proactively monitor such dues and ensure that they are factored into the resolution plan – this helps avoid unexpected obstacles later in the process.

In cases where there are schemes or deadlines offering compounding benefits or discounts on development dues if paid within a specific timeframe, the role of the Resolution Professional becomes even more pivotal. These opportunities can materially affect the viability of the resolution plan and the financial outcome for all stakeholders, but they often come with very tight timelines and require swift, informed decision-making. In such situations, it is vital to immediately communicate the urgency to the CoC. I ensure that the CoC understands the implications – how missing a deadline could lead to increased liabilities, penalties, or the loss of cost-saving opportunities. It is not just about meeting procedural timelines; it is about strategically maximizing value for all stakeholders involved.

In a couple of cases, you also faced lack of interest among bidders. How do you ensure interest of bidders in any particular corporate debtor?

Understanding the root cause behind the lack of interest is crucial. Sometimes it stems from the perceived risk associated with the corporate debtor; in other cases, it may be due to unclear asset structures or unattractive business fundamentals. My approach begins with engaging directly with potential bidders — whether they are established industry players or emerging investors — to understand their concerns and expectations. This helps in tailoring the process, highlighting the viable opportunities, and addressing any misconceptions they may have.

It is also essential to ensure that the Virtual Data Room (Information Memorandum and supporting documents) is well-organized, comprehensive, and user-friendly. When bidders have access to reliable and complete information, they are in a better position to evaluate the opportunity and submit informed bids.

Ultimately, by being transparent, responsive, and proactive, we can foster an environment of trust and clarity. When potential investors see a clear path to profitability and a well-structured opportunity, they are far more likely to engage seriously, leading to better outcomes for all stakeholders involved.

There are cases where resolution amount is lower than the liquidation value, and yet you managed to get a resolution rather than lenders pushing for liquidation. How did you manage to do it?

If one can present a plan that minimizes risk and provides a clear path forward, the CoC is often more willing to consider it, even if the amount is lower than liquidation value. It is about getting parties to understand that a resolution is the best way to ensure preservation of value, rather than liquidation. Liquidation process would take months, if not years, to complete. During this time, the value of assets can deteriorate, further eroding the potential value. The process also involves a number of costs and legal complexities, and there is no certainty that the final recoveries will even be close to the initial projections. Hence, communication and dialogue with the CoC members is critical.

From your experience, do you think CoC needs to have a code of conduct?

In my experience, a Code of Conduct for the CoC would be highly beneficial to streamline the insolvency process and ensure better outcomes.

One key aspect of such a Code should be the sharing of information. In many cases, delays in or lack of transparent communication among CoC members can significantly stall the entire process. Clear guidelines on information sharing would ensure that all stakeholders have access to the same data, enabling more informed, timely decision-making. This transparency would also help reduce misunderstandings and build trust, which are often sources of friction in complex insolvency proceedings.

Another critical area would be the contribution to CIRP costs. Often, creditors delay their financial contributions or fail to commit promptly, which can lead to unnecessary delays. A formalised Code of Conduct would set clear expectations for timely and equitable contributions from all CoC members. When everyone contributes their fair share, it not only ensures the smooth operation of the CIRP but also fosters a sense of collective responsibility toward the outcome.

Lastly, I believe a Code could facilitate faster decision-making. The insolvency process is time-sensitive, and delays in decision-making can result in lost opportunities – whether in terms of assets or potential resolution applicants. If CoC members have clearly defined roles and responsibilities, the approval process for key decisions, such as resolution plans or interim funding, could be expedited. I recall one case where CoC members delayed the resolution plan approval for over three months, which was detrimental to the overall timeline and progress of the case. In short, a Code of Conduct for the CoC would promote a more organized, efficient, and transparent process, ultimately leading to better outcomes for creditors and stakeholders

How do you ensure cooperation from existing management of a corporate debtor?

In my experience, when dealing with the existing management of a corporate debtor, I adopt a practical approach — assuming there will be zero cooperation and treating any cooperation that does occur as a bonus.

While the law provides remedies like Section 19(2) of the IBC for non-cooperation, the reality is that these applications often move slowly. By the time meaningful action is taken by the Adjudicating Authority, the CIRP is typically nearing its conclusion. Therefore, relying solely on this legal route is not effective in most cases.

I believe that a stronger deterrent mechanism should be in place for suspended directors who fail to cooperate. Ideally, this should be addressed at the policy level, as the lack of consequences often encourages non-cooperation, particularly if promoters know the CIRP will ultimately conclude regardless of their actions.

That said, I always try to engage constructively with the management at the outset. A calm, clear, and firm approach in the early stages can often lead to basic compliance. Sometimes, simply explaining the process can help break through resistance. I also make it a point to involve the CoC early on, especially if crucial records or information are being withheld.

Ultimately, the goal is to ensure that the CIRP progresses smoothly, even in the face of lack of cooperation. Being prepared for resistance and moving forward decisively is essential to protecting the value of the company and safeguarding the interests of the creditors.

Also See: Pooja Bahry: A pioneering woman in India’s insolvency sector