Now, home buyers in India may have a reason to rejoice as the Union Cabinet on May 23 has cleared the amendments to the Insolvency and Bankruptcy Code (IBC) which will also include the recommendations that have been made by the 14-member government-appointed panel.
The ordinance, which still awaits Presidential assent is likely to include provisions that will end homebuyer’s woes and make recoveries easier for lenders, reported The Indian Express.
During the media briefing, Minister for Law and Justice Ravi Shankar Prasad said, “it’s a new legislation…the Cabinet has approved it”. He added, “An Ordinance, till it is approved by the President, I cannot speak about the details.”
What is the Insolvency and Bankruptcy Code
The Insolvency and Bankruptcy Code 2016 (IBC) was first introduced in Lok Sabha in December 2015 which came into effect from August 19, 2016. The IBC is a comprehensive law that seeks to consolidate the erstwhile framework by creating a single law for insolvency and bankruptcy within the nation.
The provisions of the code are applicable to companies, limited liability entities, firms and individuals as well which calls for a time-bound resolution process.
In a first, Tata Steel, while following IBC guidelines, made headlines last week when the company successfully acquired a bankrupt firm, Bhushan Steel as it was unable to pay its creditors.
The 14-Member Law Panel
With the growing number of cases that have been filed under IBC, the government had set up a 14-member panel in November 2017, to suggest ways to address issues faced while implementing the law.
The Insolvency Law Committee, headed by Corporate Affairs Secretary Injeti Srinivas is responsible for taking into consideration the implementation of the code reported Economic Times.
This is the second such amendment which was propelled by the Law Committee’s recommendations. The first was in January 2018 when the code was amended to prevent unscrupulous persons from misusing the law, reported NDTV Profit.
The Recommendations
The new amendment will treat homebuyers as financial creditors which means that a home buyer who has been stuck in incomplete real estate projects, only, will get the home or a refund.
Additionally, this will allow home buyers to equally participate in an insolvency resolution process and be a part of the committee of creditors- a move that was earlier absent from the code.
Moreover, the proposed changes also enable promoters and managers or guarantors to creditors of MSMEs undergoing resolution to bid for their companies, except in the case of proven wilful default.
