Forum For People's Collective Effort Expresses Displeasure Over Recent Amendments To Insolvency & Bankruptcy Code

The Forum for People's Collective Effort (FPCE) has expressed displeasure over recent amendments made to the Insolvency and Bankruptcy Code (IBC) which set a minimum benchmark on the number of home buyers taking a builder to the NCLT.

FPCE has stated that such an amendment makes the bankruptcy law practically redundant for distressed home buyers.

Home buyers willing to take the developer to an insolvency court, will now have to ensure that a minimum of 100 home buyers or 10% of total home buyers file for bankruptcy against developers, as per the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019, tabled in the Lok Sabha on December 12.

FPCE President Abhay Upadhyay said that this amendment has stripped distressed home buyers of their rights as financial creditors. Now it would become “nearly impossible” for them to drag errant builders to the National Company Law Tribunal (NCLT) for bankruptcy.

“We have been opposing this amendment in IBC and we feel that because of this amendment, this platform (IBC) for all practical reasons will not be available for home buyers. Gathering so many people, 100 people or 10% is very difficult, or next to impossible,” Upadhyay said.

He expressed surprise over the fact that a right accorded to home buyers just a year ago, has been diluted by the government.

In 2018, the government through an amendment had accorded the status of financial creditors to home buyers at par with banks, giving them a much stronger say in the insolvency process.

“Though the law made us the financial creditors, at one stroke you have taken away the right from me, for all practical reasons,” Upadhyay said.

He further said that since the government could not put the bill to vote, it may come up with an ordinance.

As per the bill, all the pending applications by home buyers against the developers, which have not been admitted will have to meet the new requirements within 30 days of the commencement of the Act, failing which the application shall be deemed to be withdrawn before its admission.

Upadhyay also expressed displeasure over the retrospective effect of the amendment.

In November, FPCE had written to the Prime Minister requesting the government not to go ahead with the proposed amendment as it would dilute the rights of distressed home buyers.

Among other changes, the latest amendment also provides for the protection of buyers from criminal proceedings against previous promoters of bankrupt real estate firms.