President on Wednesday gave assent to the ordinance making amendments to the Insolvency and Bankruptcy Code (IBC), which will recognise the status of home buyers as financial creditors.
President on Wednesday gave assent to the ordinance making amendments to the Insolvency and Bankruptcy Code (IBC), which will recognise the status of home buyers as financial creditors. “The President today (Wednesday) gave assent to promulgate the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018,” an official statement said. The ordinance gives homebuyers significant power by recognising them as financial creditors. The homebuyers will also get due representation in the Committee of Creditors and make them an integral part of the decision making process.
“It will also enable home buyers to invoke Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016 against errant developers. Another major beneficiary would be Micro, Small and Medium Sector Enterprises (MSME), which form the backbone of the Indian economy as the biggest employer, next only to the agriculture sector,” the statement said.
In terms of the immediate benefit, the new power doesn’t disqualify the promoter to bid for his enterprise undergoing Corporate Insolvency Resolution Process (CIRP) provided he is not a willful defaulter and does not attract other disqualifications not related to default.
The amendments also empower the central government to allow further exemptions or modifications with respect to the MSME Sector, if required, in public interest, the release said.
“The Ordinance also provides for a mechanism to allow participation of security holders, deposit holders and all other classes of financial creditors that exceed a certain number, in meetings of the Committee of Creditors, through the authorized representation,” the release said.
In addition, the present Section 29(A) of the IBC, 2016 has also been fine-tuned to exempt pure play financial entities from being disqualified on account of non-performing assets (NPAs). “Similarly, a resolution application holding an NPA by virtue of acquiring it in the past under the IBC, 2016, has been provided with a three-year cooling-off period, from the date of such acquisition. In other words, such NPA shall not disqualify the resolution application during the currency of the three-year grace period,” the release said.