Insolvency & Bankruptcy Code amendment to secure Homebuyer’s rights

In a welcoming news for homebuyers in India, the Government has decided to treat the buyers as equivalent to financial creditors i.e. at a same footing as Banks in cases of insolvency process against debt-ridden home builders such as Jaypee Infratech and Amrapali. A Financial Creditor is the one that lends money to these infrastructure companies, i.e. to say banks, and have a say in the insolvency procedure. This will be carried out by bringing amendments in the Insolvency & Bankruptcy Code 2016, by way of an ordinance that was cleared by the Union Cabinet. With the amendment coming into effect, it will give rights to representatives of the homebuyers to have a say in the committee of creditors which approves a plan to be undertaken to resolve the insolvency and ensure that banks are not the only entities that benefit from it. It will help the homebuyers to secure their interests as well. The amendment will however be prospective in nature. The process does not come sans challenges such as the degree of representation of the homebuyers, or the diluting control of banks in the proceedings. It also does not secure the homebuyer of an apartment or an interest on the investment thereof. Lastly, it would also make the process more time-consuming. Corporate Affairs Secretary Injeti Srinivas, who headed the committee to suggest he changes, stated in their report that initially the homebuyers were treated as suppliers or the operational creditors in the whole scheme of things, but now in consonance with the National Company Law Tribunal be treated at par with the financial creditors and appoint different classes of Resolution Professionals for their aid.