The Ministry of Corporate Affairs (MCA) is gearing up for some crucial amendments to the Insolvency and Bankruptcy Code
(IBC) to provide more rights to individual consumers, including worried homebuyers.
Other consumers who might also benefit are telecom subscribers, said sources.
A senior official from the MCA
said there was a bit of problem in ensuring that homebuyers
receive a status equal to banks, as lenders will then become reluctant to lend to builders.
The Jaypee Infratech case led to these discussions in the ministry. When the company went in for insolvency proceedings, homebuyers
were left in the lurch, with no way to file their claims.
The Insolvency and Bankruptcy Board of India (IBBI) had issued Form F, using which house owners could raise their claims. Now, the MCA
is figuring out a way to bring in a one-time solution for these consumers by bringing in amendments to the code.
At present, even if house owners fill Form F, their claim would be looked into after dues of financial institutions are settled.
Also, there is no regulation that talks about creditors other than financial and operational ones.
Officials handling the Jaypee insolvency case said the representation of fixed deposit holders in the committee of creditors also became an issue. There were around 7,500 fixed deposit holders, who had to be accommodated in the committee of creditors’ meeting, according to the law.
In a recent tweaking of rules under the IBC, the regulator asked resolution professionals to state in the resolution plan how different stakeholders are treated. This will also offer some comfort to stakeholders like flat owners.
Sources pointed out that the government is mulling allowing firms to become insolvency resolution professionals (IPs), instead of the current practice of only individuals being allowed to do so.
The government feels that, anyway, an individual insolvency professional needs associates to help with the corporate resolution process. For instance, the 12 big cases recommended by the Reserve Bank of India to banks for insolvency proceedings saw bigger teams assisting the resolution professional in the restructuring plan. In the case of Amtek Auto, for example, there are around 30 associates working on the case with the resolution professional, who is a partner of Ernst & Young. Likewise, in other cases as well, the IP is assisted by a team in the corporate resolution process.
That is why the government wants to formalise it by allowing firms also to present resolution plans, as they anyway help individual resolution professionals.
Insolvency professionals state that in many cases even the promoters of the companies that are going through the insolvency process are assisting the insolvency professional in running the company and presenting the plan. With the amendment, firms like EY and Deloitte can work as resolution professionals instead of only their partners enrolling as insolvency professionals.