In this year's August, to protect the rights of homebuyers, the supreme court rendered a landmark decision to uphold the amendments to the Insolvency and Bankruptcy Code(IBC Act). This amendment entitled that home buyers will be given the status of financial creditors and will be a part of the Committee of Creditors.
This decision was expected to shape the future of the real estate industry but was skewed a bit far in favour of the home buyers troubling the real estate developers. Recently, due to lengthy delays in completing projects and other problems, many real estate companies have been pushed into insolvency proceedings by home buyers. There was also significant instances where well-functioning real estate firms have been pulled by a single home buyer who wishes a refund into the insolvency proceedings
Half the list of cases for insolvency instances covered are not much required of lengthy procedures and calculations on the value of the assets. So it was time for the government to explore creative methods to guarantee that home buyers do not abuse the insolvency resolution structure, including having a threshold.
Insolvency and Bankruptcy Code Amendments for Home Buyers
So far, concerning the trust-worthy home buyers, giving them the financial creditors status was best. But, what about them who make illegal use of their rights? Keep this in mind! The Indian government could be gazing the revised rules of Insolvency and Bankruptcy Code (IBC Act). It is to envision abuse by the home buyers with a limit set to trigger the IBC Act for real estate developers. And guarantee that no single home buyer can misuse the regulations.
As per the revised rules, a home buyer is mostly represented by a legal representative, unlike an ordinary economic creditor on the Creditors Committee. This ensures that no home purchaser can misuse the regulations for bringing the developer to the National Law Tribunal of the Company.
In one year, the personal insolvency system would be entirely in place in India. With the Ministry adding that the Cross-Border Insolvency Framework is prepared, and the law is to be adopted in the parliamentary winter session. The country's debt recovery tribunals (DRTs) would be the governmental set-up to look at personal insolvency.
Insolvency and Bankruptcy code offers an opportunity for the buyer/seller to quit a trade gracefully, and several cases are settled before they can be admitted under IBC. This amendment in the IBC Act is expected to prevent unscrupulous persons from misusing the law, and both the parties get seamless transparency in the overall real estate system.
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