More stiff rules on cards for homebuyers taking developers to bankruptcy
The Insolvency and Bankruptcy Code (IBC) is possible to experience more changes. As per sources, the Ministry of Corporate Affairs (MCA) would soon propose revisions to the code, including protection for new buyers and stiff rules for homebuyers regarding taking developers to the NCLT.
One of the revisions, which is possible to go to the cabinet soon would give protection to new buyers of an indebted company against frauds done by its former owners.
The cabinet is also expected to announce more stringent norms for homebuyers taking developers for insolvency proceedings under IBC. As per the sources, MCA may set a standard for homebuyers to begin insolvency procedures through the next revision, in a bid to limit violation of the IBC.
Ministry is also looking at a distribution formula for financial and operational creditors to produce a hybrid system of the auction of properties with a strong analysis of resolution applicants to give the system more transparent and legal hassle-free.
In the last 3 years, 21,000 cases came to IBC, out of which approximately 10,000 have been settled. As many as 8,500 cases prior to admission and nearly 1,500 cases were resolved and over 1,500 cases are still under consideration.
Homebuyers, however, have not been satisfied with the idea and Forum for People’s Collective Efforts (FPCE), a homebuyers’ association, also asked Prime Minister Narendra Modi’s arbitration to stop any move to limit home buyers from moving the NCLT.
In the next revision, the ministry may also bring in the much-anticipated cross-border bankruptcy rules under the IBC. Once it approved by the Cabinet, the reforms are likely to be passed by Parliament in the ongoing winter session.
After approval, these amendments would be the latest to join a number of changes and additions to the 3-year-old IBC, after MCA earlier this month notified the rules for resolution of systemically important financial services providers (FSPs) under the bankruptcy law.
