INSUBCONTINENT EXCLUSIVE:
The Cabinet panel has also suggested relaxations for micro, small and medium enterprises under the IBC.
The Cabinet on Wednesday approved promulgation of an ordinance to amend the
Insolvency and Bankruptcy Code (IBC)
The ordinance proposes to classify home buyers as "financial creditors" at par with lenders to help them swiftly get refunds from the
defaulting real estate companies
The amendment was introduced comes months after a new Section 29A was added into the bankruptcy code in November, introducing four layers of
ineligibility for potential bidders.The amendment was mooted on the suggestions of a 14-member government appointed committee
The Insolvency Law Committee had last month recommended to the Ministry of Corporate Affairs, that home buyers should be treated as
financial creditors, which will allow them to equitably participate in an insolvency resolution process.Briefing reporters after the meeting
of the Union Cabinet, Minister for Law and Justice Ravi Shankar Prasad said, "It's a new legislationthe Cabinet has approved it".Mr Prasad,
however, didn't divulge any more details citing constitutional provisions
He said, "An Ordinance, till it is approved by the President, I cannot speak about the details".The Cabinet panel has also suggested
relaxations for micro, small and medium enterprises (MSMEs) under the IBC.With realty firms, such as Jaypee Infratech, facing insolvency
proceedings, the ordinance, once approved by President Ramnath Kovind and promulgated, will provide relief for home buyers facing hardships
due to incomplete real estate projects.Under the code, financial creditor implies any person to whom a financial debt is owed
The financial debt can include money borrowed for interest.The panel had suggested that the government should exempt MSMEs from application
of certain provisions of the code
"Illustratively, since usually only promoters of an MSME are likely to be interested in acquiring it, applicability of section 29A has been
restricted only to disqualify wilful defaulters from bidding for MSMEs," it had noted
Section 29A of the Code pertains to ineligibility criteria for bidders.Besides, the panel had suggested that only those who contributed to
defaults of the company or are otherwise undesirable should be ineligible from bidding for stressed assets under the Code.For withdrawal of
resolution application in exception circumstances, the panel has suggested that in such cases, there should be approval from the Committee
of Creditors (CoC) with ninety per cent of voting share."In order to facilitate successful implementation of the resolution plan by the
successful bidder, it has been proposed to allow one year time to obtain necessary statutory clearances from central, state and other
authorities or such time as specified in the relevant law, whichever is later," the committee said.In January, the IBC was amended to
prevent unscrupulous persons from misusing the law
Wilful defaulters and those whose accounts have been classified as non-performing assets, among others, are barred from bidding for stressed
Steel, in a first successful acquisition of a bankrupt firm under the IBC provisions, acquired Bhushan Steel that was unable to pay to its
35,200 crore towards financial creditors of Bhushan Steel is being undertaken as per the terms of resolution plan as approved by the NCLT on
