The Union Cabinet may clear an Ordinance on Wednesday to amend Insolvency and Bankruptcy Code (IBC) aiming to give relief to thousands of home buyers who are fighting a legal battle against builders over non-completion of projects.
The amendment is also expected to give relief to small and medium companies in which barring wilful defaulters, the owners of MSMEs (Micro, Small and Medium Enterprises) can bid for their own companies in the resolution process.
The amendment will remove a clause in the Code that discriminates between home buyers and 'financial creditors' or banks and other financial institutions. The amendment will allow home buyers to equitably participate in an insolvency resolution process and their right to be compensated will be as important as those institutional or other creditors who have provided loans to the developer.
As per provisions of the IBC, home buyers are “unsecured creditors” and cannot initiate the resolution process in case of insolvency and this right is reserved for the financial creditors.
Also, the Ordinance is expected to clear the confusion prevailing over the Bankruptcy Code and the Real Estate (Regulation and Development) Act, which appear to be pitted against each other when it comes to resolving interest of bankers and home buyers.
The amendment is also expected to give certain relaxations for MSMEs under the Code.
A 14-member committee constituted by the corporate affairs ministry has suggested these changes along with several others that have come in the way of the implementation of the Code.
In January, the IBC was amended to prevent unscrupulous persons from misusing the law. Wilful defaulters and those whose accounts have been classified as non-performing assets were barred from bidding for stressed assets. The Code provided for market-determined and time-bound insolvency resolution process.
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