Gaurav Gaur
New Delhi [India], Aug.16 (ANI): Insolvency and Bankruptcy Code 2016(IBC 2016), has been enacted to reorganise and provide insolvency resolution for corporate entities and partnerships in a time bound manner. The nub of the code is to bring back defaulting companies on road to recovery, to promote entrepreneurship, availability of credit and balance of interests of all stakeholders.
The admission of Insolvency petition preferred by IDBI against Jaypee Infratech Limited on 09.08.2017 by National Company Law Tribunal (NCLT), Allahabad has spurned a lot of debate with reference to the rights and remedies for home buyers under IBC 2016 against the Corporate Debtor.
There are numerous projects throughout the country where the builders have taken the individual buyers for a ride. Home-buyers have raised loans from Financial Institutions and Banks and there are many who have paid out of their hard earned money and savings. Since these home-buyers do not fall within the definition of either a Financial Creditor or and Operational Creditor as inclusively defined in sections 5(7) read with Section 5(8) and Section 5(20) read with Section 5(21) respectively of IBC 2016, therefore its debatable as to what options can be exercised by thousands of home-buyers.
The controversy and confusion is compounded by a pronouncement made by National Company Law Appellate Tribunal(NCLAT) with regard to home-buyers under the assured return plan wherein the home-buyer is considered as a Financial Creditor, however the pronouncement is silent about home-buyers of any other category, thus leaving a grey area open to interpretation and endless debate.
Divergent opinions have been voiced over the Forms that need to be filled by the homebuyers in order to file their claims with the Interim Resolution Professional so appointed in the matter.
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Lawyers, Insolvency Professionals and experts are of the opinion that a fine reading of Section 5(7) read with Section 5(8)(f) of the IBC 2016 places the home-buyers with in the definition of the term Financial Creditors, thus the homebuyers could prefer their claims to be filed in Form-C of the Insolvency Resolution Process for Corporate Persons Regulations, 2016, however this approach is fraught with the possibility of opening up the Pandora's box.
To recognise the home-buyers as Financial Creditors would open up the flood gates for the claims to be filed with the IRP's(Insolvency Resolution Professional) in a time bound manner in this matter and all other similar matters, which could prove to be a gargantuan task considering the number of projects of Jaypee Infratech Limited and countless defaulting realtors and builders as the claims would run into a tens of thousands.
With such huge number of claims that are likely to be preferred, how will the IRP cope with expeditious processing and collation of Claims as envisaged in the Act. Additionally if home-buyers were to be treated as Financial Creditors, then it would result in a mad dash by home-buyers to take all the defaulting builders to NCLT and file Insolvency petitions to recover their dues.
Furthermore one also has to consider the fact that in a majority of cases the home-buyers have taken loans to finance the purchase of the dwelling units and that being state of the matter whether it is the home-buyer who can be really considered as the Financial Creditor or the Bank which has financed the purchase.
The need of the hour is for IBBI and the Government to step in, clarify, if need be Regulate, legislate and alleviate the concerns and sufferings of the innocent flat buyers who have invested a lifetime of savings and dreams in these homes and yet have no answers.
It is of utmost urgency that the authorities act as the public announcement in this matter has already been effected and last date of submission of claims has been announced.
With absolutely no clarity of the mode of preferring of claims by homebuyers a lot of the hassled home-buyers are already consulting Lawyers and Insolvency Professionals in formulating and strategising the course of action, thereby further undertaking expenses in paying fees and charges of the Professionals and burdening themselves.
It is apparent that even though there is no specific provision of any aid to the home-buyers and that the Code is heavily tilted in favour of the Financial Creditors, however it should in no way keep the homebuyers from preferring their claims with the IRP for the sake of formality and hope that the present proceedings culminate into a successful resolution rather than liquidation.
Mr. Gaurav Gaur is an advocate and insolvency professional. The views expressed in this article are personal.
Disclaimer: No Business Standard Journalist was involved in creation of this content
