The government is studying the Insolvency and Bankruptcy Code on a “comprehensive basis” to amend the law to provide relief to thousands of homebuyers stuck in projects where builders are claiming insolvency.
In an interview to Moneycontrol on Friday, the Housing and Urban Affairs Minister Hardeep Singh Puri, said that he has directed his officials to study the provision of similar laws in other countries and come up with suggestions for improving the IBC.
“We are now looking at the issue on a more comprehensive basis. I have instructed my officers, my colleagues to look at what the provisions are with regard to insolvency bills in other countries. After all, these are not problems particular to India. Now, there are several options that suggest themselves and we are compiling those possibilities,” he said, adding the government’s priority is to protect the homebuyers.
“The problems of homeowners are well known. They are known to the state government; the Uttar Pradesh CM has already issued instructions to the builders and these problems are known to the Finance Minister; they are known right across the government,” he said.
“As we go along we will take a view. The idea clearly is to provide relief but the relief has to come not through executive action. It has to be provided for in the system of rules,” he said.
Stating that he has already discussed the matter with the Finance Minister, Puri said that it is the “Corporate affairs Ministry that has the responsibility under the rules of business to deal with this issue of Insolvency Bill,” he said.
He said that he has had delegations, groups and associations visit him and make an offer to take up incomplete flats that are yet to be completed.
“You have to break the vicious cycle. One negative leads to another and at the end of the day we need to think of ways and means to revive the real estate sector,” he added.
The government is considering amending the Insolvency and Bankruptcy Code (IBC) to protect the interests of homebuyers. Legal experts say there are two options before it – amend the bankruptcy law to ensure that buyers get their due and not lose out to banks and financial institutions when a defaulting builder’s properties are liquidated and debts settled or to change the law’s operational rules to make homebuyers trustees so that their investments are mandatorily protected.
The Jaypee Infratech case involving almost 40,000 homebuyers was a unique case because other companies that were taken up under the Insolvency and Bankruptcy Code were business-to-business firms such as steel and power companies but Jaypee Infratech involved thousands of homebuyers. Also, this week, the Supreme Court has lifted the stay on the insolvency resolution proceedings against ailing real estate firm Jaypee Infratech and reinstated the National Company Law Tribunal-appointed insolvency resolution professional (IRP) Anuj Jain asking him to submit an interim plan to the apex court within 45 days. It also ordered JP Associates, the parent company, to deposit Rs 2000 crore before the Supreme Court by October 27.
National Company Law Tribunal (NCLT) has ordered initiation of insolvency proceedings against Amrapali's Silicon City in Noida on a plea by Bank of Baroda and appointed Rajesh Samson of Deloitte as the Insolvency Resolution Professional to take control of the company.Vandana.firstname.lastname@example.org