This was indicated by Secretary, Ministry of Corporate Affairs, I. Srinivas at an event here
On
home buyers, Srinivas hinted at steps to check abuse by them, if any,
saying that a threshold would be introduced for home buyers to trigger
the IBC process fora real estate developer. This will ensure that no
single home buyer can misuse the provisions for taking the real estate
developer to the National Company Law Tribunal.
"Half of the
cause list for insolvency cases filled with real estate cases... there
is a need to check abuse and maximise value of assets," he said.
The
government will look at innovative ways, including having a threshold,
to ensure that the insolvency resolution framework is not abused by home
buyers. There have been large number of cases where "otherwise
well-functioning real estate companies have been pulled into the
insolvency proceedings by a single home buyer who wants a refund", he
said.
Srinivas pointed out that there might be speculative home
buyers also in such cases and if a single person is able to dislocate
when there is otherwise no issue, they have to look at some threshold.
Such checks and balances can be built in by way of regulations or
amendments, he said here.
Homebuyers are treated as financial creditors under the IBC.
Unlike
a normal financial creditor who is on the Committee of Creditors, a
home buyer is represented by a legal representative mostly.
In
recent times, many realty firms have been dragged to insolvency
proceedings by home buyers on account of long delay in completion of
projects and other issues.
In August this year, the Supreme Court
upheld the constitutional validity of amendments made to the IBC which
conferred the 'financial creditors' status to home buyers and entitled
them to be a part of the Committee of Creditors to safeguard their
interests.
The Secretary said the personal insolvency regime
would be fully operational in India in one year from now, adding the
ministry is ready with the Cross Border Insolvency Framework and the law
will be passed in the winter session of Parliament.
"Debt
recovery tribunals (DRTs) in the country would be the institutional set
up that would look at personal insolvency," he said at an event to mark
the third birth anniversary of Insolvency and Bankruptcy Board of India
(IBBI) here.
He was hopeful the cross border insolvency regime -
based on the UNCITRAL model - would be enacted in the upcoming winter
session of Parliament.
Finance Minister Nirmala Sitharaman
said that the IBC gives a promoter an option to gracefully exit a
company and many cases are getting resolved even before being admitted
under IBC. She lauded IBC's three year journey, stating that this
legislation has been an efficient, market-driven one, enabling easier
exits for those looking for a seamless mechanism to get out of their
businesses.
