The Union Cabinet on May 23, 2018 approved the ordinance to amend the Insolvency and Bankruptcy Code, 2016 (IBC), heaving a sigh of relief to homebuyers who have invested in housing projects of real estate companies that have gone bankrupt. The committee of creditors’s voting rights of resolution plans will be limited to 66 percent from earlier threshold of 75 percent, a move that will help speed up the resolution process.
The ordinance also exempts MSMEs from disqualification under Section 29 of the IBC. The Micro Small and Medium Enterprises (MSMEs) will now be exempted from all conditions. As per Section 29 of the IBC Act, a person or a company suffering disqualification, can’t participate in the resolution process. The ordinance proposes to facilitate implementation of the resolution plan by the successful bidder. It provides a year time to obtain necessary statutory clearances from central, state and other authorities.
1. The Union Government had earlier formed a 14-member Insolvency Law Committee (ILC) headed by corporate affairs secretary Injeti Srinivas to recommend amendments to the Insolvency and Bankruptcy Code, 2016.
2. It recommended the government to treat homebuyers as financial creditors and allow them to equitably participate in the insolvency resolution process.
3. The committee also proposed to make the recovery process for lenders easier and speed up the decision-making process by creditors.