The Insolvency & Bankruptcy Board of India (IBBI) has amended the insolvency rules making it compulsory for any company to distinguishably state the measures taken for the protection of stakeholder’s interest in the resolution plan. The rules were amended to protect the interest of homebuyers of real estate companies like Jaypee Infratech+ Amrapali Group+ and make sure that their interest is treated at par with that of banks and other creditors.
The resolution plan is required to be submitted to the Committee of Creditors within 180 days, with an extension available for 90 days in certain circumstances. Once the resolution plan is approved, the NCLT has the power to initiate liquidation procedure against the company. The banks are one of the decision-making authorities in this committee once insolvency proceedings are initiated against the real estate company. The revised rules will ensure that the banks and other credits do not put their interest above the interest of homebuyers.
The Insolvency and Bankruptcy Code was enacted in 2016 to consolidate and simplify the insolvency resolution process and provided for the appointment of Insolvency professionals who have the powers undertake the company’s operations and prepare an insolvency plan. The IBC fundamentally includes the procedures and administrative blueprint for insolvency of different bodies.
It also lays down the structure for instituting the Insolvency & Bankruptcy Board of India, Insolvency Professional Agencies and Information Utility, along with the framework for registration and regulation of these bodies. However, the law was criticised was not considering the interest of homebuyers and for being more favouring to banks and other creditors.
Under the unamended law, there was no liability to take care of the interest of stakeholders except financial and operational creditors. Now, the revised laws state that the National Company Law Tribunal (NCLT) will not approve any resolution plan without informing all the stakeholders. Homebuyers have been empowered to raise objections against this resolution anytime.
Additionally, the Insolvency and Bankruptcy Board of India has invited public opinion on what must be the procedure for insolvency process which involves guarantors and individuals that have businesses. These comments have to be submitted in the Draft Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Individuals and Firms) Rules, 2017 and Draft Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Individuals and Firms) Regulations, 2017 by October 31.
The Ministry of Corporate Affairs (MCA) is also preparing to revise the Insolvency Code to provide additional rights to homebuyers and other individual consumers. The authorities say that the dilemma of homeowners will be restricted only to ongoing projects as the recent measures such as RERA, 2016, GST and Insolvency Code are proficient to safeguard the interest of homebuyers in any future projects.
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