October 02, 2019

Government Looking At Further Amending IBC Laws To Check Abuse Of Its Provisions By Individual Home Buyers

[ By Bobby Anthony ]


The government is looking at further amendments in the Insolvency and Bankruptcy Code (IBC) to check abuse by individual home buyers.

A threshold would be fixed for homebuyers to trigger off the IBC process for real estate developers in an effort to ensure that no single home buyer can misuse IBC provisions to take the real estate developer to the National Company Law Tribunal (NCLT), according to the Secretary, Ministry of Corporate Affairs I Srinivas.

He stated that half of the cause list for insolvency cases are full of real estate cases, due to which there is a need to check abuse and maximize value of assets.

There have been a large number of cases where otherwise well-functioning real estate companies have been pulled into the insolvency proceedings by a single home buyer who wants a refund, he stated.

Srinivas pointed out that there could be speculative home buyers in such cases. If a single person is able to disrupt a situation when there is otherwise no issue, they have to look at some threshold. Such checks and balances can be built in by way of regulations or amendments, he said here.

Under the IBC, homebuyers are treated as financial creditors. Unlike a normal financial creditor who is on the Committee of Creditors, a home buyer is represented by a legal representative.

In recent times, many realty firms have been dragged to insolvency proceedings by home buyers due to long delay in completion of projects and other issues.

In August, the Supreme Court upheld the constitutional validity of amendments made to the IBC which conferred the 'financial creditors' status to home buyers and entitled them to be a part of the Committee of Creditors to safeguard their interests.

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