While homebuyers who have invested with companies facing insolvency action have welcomed the revised notified norms for the insolvency resolution process, especially the one concerning the right to nominate their representative from a panel of three insolvency professionals to represent them on the committee of creditors, they have expressed their displeasure over the 8 percent interest rate, saying it is too low.
The amendment to one of the regulations states that “where the rate of interest has not been agreed to between the parties in case of creditors in a class, the voting share of such a creditor shall be in proportion to the financial debt that includes an interest at the rate of 8 percent per annum.”
“This is disappointing because no financier disburses a loan at this rate, home loans are also priced higher. They have also not referred to RERA at all or the delay penalty under the regulatory mechanism. Under RERA it is clearly mentioned that the delay penalty will be calculated on the basis of the prevailing SBI MCLR rate plus 2 per cent. Eight per cent is even lower than that. It seems they are favouring banks over homebuyers. Delay compensation at the rate of 8 per cent is too low,” says Ramakant Rai, a lawyer representing Jaypee homebuyers in the Supreme Court case.
Following amendments to the Insolvency and Bankruptcy Code, thousands of homebuyers invested with Jaypee and Amrapali will now get a representation in the committee of creditors, the body that decides the fate of stressed companies.
Homebuyers have welcomed the revised norms to do with them getting to select their representative in the COC.
"Wherever the corporate debtor has classes of creditors having at least ten creditors in the class, the interim resolution professional shall offer a choice of three insolvency professionals... to act as the authorised representative of creditors in each class… The insolvency professional, who is the choice of the highest number of creditors in the class, shall be appointed as the authorised representative of the creditors of the respective class," an official release has said.
“This provides a way forward with regard to representation of homebuyers in the COC. This is a step in the right direction and clarifies the manner in which the representative of homebuyers will be appointed on the COC," they say.
The IBBI (Insolvency Resolution Process for Corporate Persons) Regulations have been amended following the government coming out with an ordinance amending the Insolvency and Bankruptcy Code (IBC) in June. The amended norms clearly lay down the procedural requirements for various classes of creditors, including home buyers.
The Insolvency and Bankruptcy Board of India (IBBI) notified revised norms for insolvency resolution process that paves the way for home buyers to seek relief as financial creditors and puts in place clear timelines to be followed by resolution professionals and permits withdrawal of insolvency applications subject to certain conditions.
The revised norms say that a resolution professional would now be required to form an opinion whether the corporate debtor was involved in preferential, undervalued, extortionate or fraudulent transactions as well as make a determination of any such activity within a specified time period, as per the release.
The revised regulations have put in place a clear road map to be followed by the resolution professionals. They have to publish an invitation for Expression of Interest by the 75th day from the insolvency commencement date and the resolution professionals have to publish a provisional list of prospective applicants within 10 days from the EoI submission deadline.
An application seeking withdrawal of insolvency proceedings would be accepted under this law if the same has been approved by the Committee of Creditors (CoC) concerned with 90 per cent voting share. Once the CoC nod is in place, then the resolution professional has to submit the application to the adjudicating authority on behalf of the applicant within three days of such an approval.
"A meeting of the CoC shall be called by giving not less than five days' notice in writing to every participant,” the release said.