New Delhi: Home buyers will be able to take errant builders to court for delayed projects and get their money back once the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018, which the government introduced in Lok Sabha on Monday, is passed by Parliament.
The proposed legislation, which recognises home buyers as financial creditors to real estate developers, will help hapless buyers invoke Section 7 of the bankruptcy code that allows financial creditors to file application in the National Company Law Tribunal to seek insolvency resolution process.
The bill was introduced by acting finance minister Piyush Goyal in the lower house. The bill replaced an Ordinance which was approved by the Union Cabinet in May this year.
The proposed legislation also gives home buyers the right to be represented in the committee of creditors (CoC), which takes the key decision regarding revival of the company or its liquidation, and make them an integral part of the decision-making process.
The bill also proposes to reduce the minimum voting threshold for the CoC to 66 per cent, from 75 per cent for key decisions — a provision which was opposed by BJD member Bhartruhari Mahtab.
Opposition Congress and TMC also supported Mr Mahtab who said that the decision was being taken to benefit “one industry”.
Citing the resolution process of the textile firm Alok Industries, Mr Mahtab said that two major companies had jointly submitted before the CoC to acquire the company. However, the CoC could not approve the resolution plan as it just 70 per cent vote for key decisions, as against the stipulated 75 per cent, the BJD member said.
“The Ordinance brought by the government lowers the CoC’s minimum vote requirement for passing a resolution to 66 per cent from 75 per cent, as prescribed in the original act. This is nothing but a fixed match... It is a clear case of crony capitalisation and loot of public money,” Mr Mahtab said.
He said Alok Industries, which is worth '29.6 crore, is being sold for just '5 crore and banks are taking 84 per cent haircut because of the complicity of the government.
“The bill is being brought just to help one industry,” Mr Mahtab charged.
Terming this as “baseless allegations”, Mr Goyal said, “the law is prospective and is not intended to benefit anyone”.
The minister said when the insolvency and bankruptcy code was first introduced in Parliament, it was referred to a committee for “fine tuning”.
Based on the recommendations of the committee, the amendment bill has been brought in Parliament, he added.
