The IBC ordinance or executive order was cleared by the cabinet on May 23 In a big step to protect home-buyers, changes to the Insolvency and Bankruptcy Code (IBC) will come into force with President Ram Nath Kovind signing off on the government's ordinance or special order.
The Insolvency and Bankruptcy Code (Amendment) Ordinance aims at saving the buyers when builders declare bankruptcy in the middle of a real estate project.
Earlier, this used to leave hundreds of thousands of home buyers without any means to recover the money they invested.
With this, the situation like Jaypee Infratech is unlikely to arise where the home buyers had to file a petition In the Supreme Court for restraining the sale of assets.
When a company is bankrupt, financial creditors (banks) have the first right over the proceeds of assets.
Now, when the buyers are also treated like financial creditors, they would also stake a claim in the assets' sale as well as in the bankruptcy proceedings.