Mumbai: In view of the harassment faced by homebuyers in cases of incomplete property transactions, a committee tasked with reviewing the Insolvency and Bankruptcy Code (IBC) may bring them at par with unsecured financial creditors, reported The Economic Times. While the proposal is currently being reviewed, it would bring relief to thousands of homebuyers, especially the ones those who have acquired apartments or residencies from companies such as Amrapali and Jaypee Infratech. Often, these homebuyers end up in the back of the queue when it comes to seeking compensation from bankrupt builders.
It may be noted that thousands of homebuyers have been left in a situation of worry after the aforementioned builders were referred to the National Company Law Tribunal (NCLT) by the IDBI and Bank of Baroda, respectively after then failed to repay their debts.
The 14-member insolvency law committee was set up to identify the salient factors that “impact the efficiency of corporate insolvency resolution and liquidation framework” and give suggestions to overcome issues.
Corporate Affairs Secretary Injeti Srinivas, in an interview with ET, said the recommendations along with the draft amendments with regards to the IBC are likely to be presented towards month-end. If the recommendations are adopted, it would be a huge boost to troubled homebuyers, as it would allow them full participation in insolvency resolution process and be a part of a committee of creditors. Further, they (Homebuyers) will be getting voting rights on resolution plans.
An official also confirmed to the newspaper that “a proposal is actively considered to give homebuyers a status of unsecured financial creditors”.
In the current IBC norms, something called a “waterfall mechanism” is followed. In this procedure, there are eight levels for distribution of proceeds generated from the sale of liquidated assets among stakeholders. However, after the fresh resolution, professionals, and administrators, financial creditors and workmen’s dues will be given higher priority, followed by unpaid dues of employees other than workmen. Next in line would be unsecured financial creditors, followed by dues to the government and equity shareholders in the order. In the present scenario, homebuyers are last in line when it comes to developers.
It may be noted that more than 30,000 homebuyers of Jaypee Infratech and some 41,000 of Amrapali’s Silicon City project have appealed to the Supreme Court to treat them at the same levels as financial creditors.