This proposal will help homebuyers get promoted to a higher level and have a voice in the resolution process.
A 14-member committee working on reviewing the Insolvency and Bankruptcy Code (IBC) proposed treating homebuyers on par with unsecured financial creditors at insolvency proceedings for real estate companies.
According to a report in The Economic Times, if this move goes through, it will satisfy people who have acquired residences and haven’t heard back about the recompense from companies such as Jaypee Infratech, Unitech and Amrapali.
Jaypee Infratech and Amrapali were referred to the National Company Law Tribunal by IDBI Bank and Bank of Baroda respectively. Unitech was also in trouble after being taken to the NCLT by the corporate affairs ministry.
"Recommendations by the committee, along with the draft amendments to the IBC will likely be presented by the end of this month. And if the homebuyers measure is adopted, the biggest advantage for them will be the right to participate in the insolvency resolution process and be a part of the committee of creditors," Corporate Affairs Secretary Injeti Srinivas told the paper.
He added that this move would give the homebuyers voting rights on resolution plans.
In the current norms of the IBC, there are eight levels for the order of distribution from the sale of liquidated assets among stakeholders. Professionals and administrators are at the top level, followed by financial creditors and employees dues. Presently, homebuyers are at the last level.This proposal will help homebuyers get promoted to a higher level and have a voice in the resolution process. Around 31,000 homebuyers of Jaypee Infratech and 41,000 of Amrapali’s Silicon City projects have appealed to the Supreme Court to be treated the same as financial creditors.