The decision was taken by the Cabinet after a high-level panel recommended the government to treat homebuyers as financial creditors and allow them to equitably participate in the insolvency resolution process. Homebuyers of Jaypee WishTown had earlier opposed liquidation proposal of Jaypee Infratech. Under the IBC, home buyers were “unsecured creditors”, whose priority comes after those institutional or secured creditors.
Analysts said that not treating homebuyers as financial creditors has pitted the IBC and Real Estate (Regulation and Development) Act (RERA) against each other in case a real-estate firm goes bust. “While IBC allows companies to file for bankruptcy to provide relief to debtors or creditors, RERA looks at providing relief to home buyers and seeks to hold developers or builders responsible if the project is delayed,” industry body Assocham said a report recently.
The proposed amendments also provide for exemptions to MSMEs (Micro Small and Medium Enterprises) under the Section 29A of the IBC law. The Section 29A bars wilful defaulters, defaulting promoters and related persons from the process.