IBC amendment bill 2019 seeks to protect last-mile funding.

The Union Cabinet approved the insolvency and bankruptcy code amendments on 11 December. Based on an official release the Code amendments aim, at removing bottlenecks, rationalizing the corporate insolvency resolution process (CIRP) and protecting last-mile funding will boost investment in financially distressed sectors. 

“Additional thresholds introduced by the authorized representative for the purpose of preventing frivolous triggering of the Corporate Insolvency Resolution Process (CIRP) for financial creditors,” it added.

The revised Act would also guarantee that the company debtor’s substratum is not lost. The release states that it may continue as a concern by stating that during this moratorium, licences, permits, concessions, clearances etc. cannot be terminated, suspended or not renewed.

The Bill stipulates for the real estate industry that insolvency proceedings can only be implemented if 10% or 100 homebuyers (whichever is lower) or debenture holders consent to a move. Property developers welcomed the move, but homebuyers were disappointed.

Sumant Batra, the managing partner of the law firm Kesar Dass B & Associates said, “This is a long-due correction. Hopefully, it will help to prevent disruption in the hands of chosen persons in real estate projects. It will also lead to streamlining a settlement system by offering a consistent legislative framework.”

“It is a welcome move. It will prevent misuse of law and assures it is used for the greater interest of home buyers and real estate companies only in genuine cases. In some cases it was used earlier as a weapon twisting tool against developers that jeopardized the interest of real homebuyers,” said Gaurav Gupta of SG Estates and Joint Secretary, CREDAI-NCR.

“It is unfortunate and the interests of homebuyers have been compromised. This forum (NCLT) will be unavailable to homebuyers for all practical purposes as it may be difficult for them to retrieve the required number. If the purpose of the earlier amendment to categorize homebuyers as financial lenders have not yet been achieved, then what was the government’s compulsion to do things difficult for homebuyers other than pressure from developers? As it is, very few of them decide to take legal action,” said, Abhay Upadhyay, president, Forum for People’s Collective Efforts (FPCE).

Since it first came into force in 2016, the Insolvency and Bankruptcy Code (IBC) has been amended three times. The latest changes refer to different sections as well as a new section is added.