NEW DELHI: The government is expected to amend the insolvency and bankruptcy law to mandate that only a majority of homebuyers or fixed deposit or bond holders can drag a real estate company for insolvency action, instead of the current provision where an individual homebuyer can approach the National Company Law Tribunal (NCLT).
Sources told TOI that the ministry of corporate affairs, which is moving the proposal is also expected to provide a threshold value for these class of creditors to initiate action. In several cases a single homebuyer has moved NCLT and got the tribunal to initiate action, which many believe may not be fair. In fact, in some cases a group of buyers are seen to be acting at the behest of the real estate developer since initiation of insolvency action helps the builder avoid action in the consumer forum or under RERA.
In case of banks, which have initiated action under the Insolvency and Bankruptcy Code in a majority of cases, a common approach is usually adopted before approaching NCLT.
Recently, corporate affairs secretary Injeti Srinivas had said that in few sectors there have been a spate of applications coming where a single class borrower has triggered IBC. “If a single home buyer is triggering IBC because Rs one lakh threshold has crossed or one day default has crossed, an otherwise well functioning company comes to NCLT. It is not a very happy situation. There is feedback threshold approach has to be looked at,” he had said.
Member of Uttar Pradesh RERA, Balvinder Kumar told TOI that there was a dire need to address these issues as the main focus of the laws is to protect the interest of home buyers. “A single home buyer can derail an entire project by approaching the NCLT where the main aim is to see that the projects get completed expeditiously,” he added.
A representative of a home buyers association said while bringing such change in IBC the government must also introduce a provision to ensure that builders don’t exploit the law to approach the NCLT to start resolution process.
Sources also said the majority of the real estate regulators who recently came under one platform at a conclave by UP RERA in Lucknow have also sought changes in the RERA law to bring clarity so that there is no room for subjective interpretation of the law. Some of the regulators TOI talked to said there was need to address the issues on multiplicity of forums that home buyers can approach and to extend the applicability of the law to all stake holders including the government agencies that give approval, development authorities and those which are required to lay the trunk infrastructure.
Currently, RERA deals with only home buyers, builders and financial creditors. “RERA should have power like that of TRAI which can pass order for government agencies relating to the telecom sector,” said a regulator.
Stating that the “clarificatory” changes in the law should be expedited, Haryana RERA (Gurgaon) president, K K Khandelwal said, “All regulators got an opportunity to share their difficulties in implementing the law at Lucknow. If we are serious to balance protecting the interest of home buyers, projects and all other stakeholders, we can’t waste time on discussion,” he added.
According to reports, currently about 80-85% of the 450 cases admitted so far by the NCLT pertain to builders of the National Capital Region who have defaulted in handing over flats to homebuyers.
Source- Times of India.