By Accommodation Times Bureau
A recent high-level panel suggestion said the government that home buyers should be treated as financial creditors which allow them to equitably participate in an insolvency resolution process. The 14-member panel was headed by headed by Corporate Affairs Ministry, has also suggested relaxations for Micro, Small and Medium Enterprises (MSMEs) under the Insolvency and Bankruptcy Code.
However, it seems that it would affect the real estate sector. According to the source that did not wish to name he said, the recommendations are good at some level but, the panel needs to think beyond that which means that at macro-level, there should be some neutrality in nature.
Sharing the table with the home buyer may lead to stopping lender to fund the real estate projects because he (lender) know that at the time of insolvency the buyers will be uncontrollable, it added.
According to the detailed report, the panel has recommended that home buyers should be treated as financial creditors owing to the unique nature of financing in real estate projects and the treatment of home buyers by the Supreme Court in ongoing cases.
In the recent judgment, the Supreme Court has given big relief to 40,000 home buyers by assuring that their money is safe against the Amrapali. The Supreme Court has protected the home buyer but whereas buyer can opt to Real Estate Regulatory Authority for the same.
The Insolvency and Bankruptcy Code, 2016 (IBC) is a one-stop solution for resolving insolvencies which at present is a long process and does not offer an economically viable arrangement. A strong insolvency framework where the cost, time, incurred is minimised in attaining liquidation has been long overdue in India. The code will be able to protect the interests of small investors and make the process of doing business a less cumbersome process
Features of IBC:
Insolvency Resolution: The Code outlines separate insolvency resolution processes for individuals, companies and partnership firms. The process may be initiated by either the debtor or the creditors. A maximum time limit, for completion of the insolvency resolution process, has been set for corporates and individuals. For companies, the process will have to be completed in 180 days, which may be extended by 90 days, if a majority of the creditors agree. For startups (other than partnership firms), small companies and other companies (with asset less than Rs. 1 crore), resolution process would be completed within 90 days of initiation of a request which may be extended by 45 days.
Insolvency regulator: The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it. The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the Reserve Bank of India.
Insolvency professionals: The insolvency process will be managed by licensed professionals. These professionals will also control the assets of the debtor during the insolvency process.
Bankruptcy and Insolvency Adjudicator: The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies: (i) the National Company Law Tribunal for Companies and Limited Liability Partnership firms; and (ii) the Debt Recovery Tribunal for individuals and partnerships.