The government, it seems, has given its nod to the amendment in the Insolvency and Bankruptcy Code (IBC), which puts home buyers at par with financial creditors. It's a big step towards addressing one of the major concerns of home buyers, many of whom are waiting for builders to give possession of their promised homes. This is a big step but is fraught with many practical issues, and many questions and issues need to be settled before we can say home buyers' interest has been taken care of.
Will the home buyers get to attend the meetings of Committee of Creditors (CoC)? If yes, will they have any say in the meetings or they would just be there to see the proceedings? Or will they get the right to vote? If yes, would the right to vote would be proportion to the amount due to them or would there be any other formula to be worked out.
Some experts say that being financial creditors, home buyers should be attending the CoC meetings and even should have voting rights. "The process would evolve, but yes they (home buyers) would form an association, and the association would select someone who represents them in the CoC. They would become one of the largest financial creditors," says Bharat Dhawan, managing partner, Mazars, an audit, tax and advisory firm.
Dhawan says the move to categorise home buyers as financial creditors is a huge move. "They have put in their life's savings, you can't let that money go down the drain. I am glad that they have been accorded financial creditor's status, though he believes flat buyers should be little bit more than financial creditors," he says. Anuj Puri, Chairman, ANAROCK Property Consultants, says it needs to be seen how the resolution mechanism for claiming the dues actually falls in place for the concerned homebuyers.
"They need to know how exactly they will be represented in the creditors' committee - in other words, whether the NCLT will appoint a resolution professional to represent their rights and interests," he added. There are other questions that needs to be answered like if there would be a distinction between homebuyers and purchasers of commercial real estate, as has been done in the case of the Consumer Protection Act, 1986.
Besides, how would financial creditors like banks take this move. Punit Dutt Tyagi, Executive Partner , Lakshmikumaran & Sridharan Attorneys, says placing homebuyers at such a pedestal is not likely to be well-received by the banks, whose largely dominant position in the insolvency proceedings thus far stands threatened by this amendment.
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