Relief to home buyers! Bankruptcy Code law to be amended

New Delhi, May 24: In order to classify home buyers as financial creditors at par with lenders to help them quickly get refunds from defaulting companies, a code has been proposed which is to amend the Insolvency and Bankruptcy Code (IBC).

The code has been approved by the cabinet on Wednesday and it will come into force once it is approved by President Ram Nath Kovind.

The present amendment is based on recommendations of a 14-member government-appointed committee chaired by Corporate Affairs Secretary Injeti Srinivas that had last month suggested a slew of measures, including addressing woes of home buyers and making recoveries easier for lenders.

 

The panel has also suggested relaxations for micro, small and medium enterprises (MSMEs) under the IBC.

Under the code, financial creditor implies any person to whom a financial debt is owed. The financial debt can include money borrowed for interest. Homebuyers will be treated at par with banks and institutional creditors and will be given priority while recovering dues from bankrupt or insolvent real estate companies. 

The move will help quickly recover investments in bankrupt real-estate companies and will benefit millions of homebuyers. The amendment comes months after a new Section 29A was added into the bankruptcy code in November, introducing four layers of ineligibility for potential bidders.

The Code prescribes for the insolvency resolution and bankruptcy for individuals and partnership firms, which are proposed to be implemented in a phased manner on account of the wider impact of the provisions.

It will also disallow the sale of the property to a person who is ineligible to be a resolution applicant in case of liquidation of the corporate debtor.