Amend insolvency code to protect home buyers: Consumer groups petition PM Modi
Fight for RERA, an umbrella group of some 100 homebuyers association and consumer groups, wrote a letter to the PM on September 5 demanding amendments to the Insolvency and Bankruptcy Code, 2016.india Updated: Sep 08, 2017 15:00 IST
Consumers groups have petitioned Prime Minister Narendra Modi for protecting the interest of home buyers after insolvency proceedings were initiated against Jaypee Infratech cast an uncertainty over the fate of some 30,000 people, who have invested in flats belonging to the realty major.
Fight for RERA, an umbrella group of some 100 homebuyers association and consumer groups, wrote a letter to the PM on September 5 demanding amendments to the Insolvency and Bankruptcy Code, 2016, to ensure that home buyers get ‘top priority’ while dealing with insolvency cases involving realty developers.
“…. this case is a ticking time bomb, which if not resolved by protecting the interest of thousands of home buyers, would become a potent tool in the hands of builders who have gobbled up the life savings of millions of home buyers across the country and are looking for an exit without any corresponding liability,” Abhay Upadhyay, national convenor, Fight for RERA has written in the letter.
The Insolvency and Bankruptcy Code recognises financial and operational creditors as “secured creditors”, who can initiate insolvency proceedings against the company. The code also provides for an utmost priority in the settlement of dues to secured creditors.
Homebuyers, who have invested in projects and have not been handed over their flats, do not come either in the category of secured creditors or operational creditors. They are only recognised as mere creditors i.e. as unsecured creditors and entitled to refund from whatever is left after paying the secured and operational creditors such as banks.
“We have demanded that the code be amended to give first priority to home buyers in settling their dues by completion of project or refund with interest ie without any haircut since their stake are very high as their life savings are stuck,” said Upadhyay.
Insolvency proceedings against JIL were admitted by the Allahabad bench of National Company Law Tribunal on August 9 after IDBI Bank, the lead consortium of lenders to the realty company, moved a petition saying it has defaulted on a Rs 526 crore loan.
However, on September 4 the Supreme Court stayed the insolvency proceedings against JIL after home buyers moved the top court requesting it to direct the government to declare the home buyers as secured creditors.
Fight for RERA has also demanded that the government should initiate the exercise of collecting data of all incomplete projects across India and track the number of homebuyers stuck in those projects.
“The project should be categorized as normal and high-risk categories and accordingly steps should be taken by your government in high-risk projects so as to safeguard the interest of homebuyers in those projects either by invoking amended provisions of Insolvency and Bankruptcy Code, 2016 or Real Estate Regulatory Authority Act, 2016,” reads the letter to PM.