We take pride for having an in-depth understanding of Insolvency and Bankruptcy Code. Our formidable team of professionals has a rich experience and expertise in matters pertaining to Insolvency & Bankruptcy Code (IBC) before National Company Law Tribunal (NCLT). We regularly advise leading companies and individuals, on these issues. Our firm has represented financial institutions and companies seeking relief under the Insolvency and Bankruptcy Code, 2016, before the NCLT and NCLAT in matters involving huge stakes
The amendment to the Insolvency and Bankruptcy Code, 2016, (“IBC”) dated March 13, 2020, deemed to be in effect from December 28, 2019 (“IBC Amendment”), provides relief to homebuyers by considering homebuyers as ‘financial creditors’ and allowing them to initiate the corporate insolvency resolution process (“CIRP”) under the IBC against the developer.
This article analyses the remedies available to homebuyers against the developers of a real estate project in context of the aforesaid IBC Amendment and vis-à-vis the Real Estate (Regulation and Development Act), 2016.Precedence of proceedings under RERA and the IBCWhile the homebuyers may initiate CIRP against the developers, in view of the IBC Amendment, however, CIRP may be initiated only if the application is filed jointly by not less than: (a) 100 (one hundred); or (b) 10% (ten percent) of the total number, of such allottees under the same real estate project, whichever is less.Further, when any proceedings are initiated and subsequently admitted under the IBC, then the adjudication process envisaged under Real Estate (Regulation and Development Act), 2016 (“RERA”) may be done away with.
However, the application as filed by the allottee before the National Company Law Tribunal (“Tribunal”) under the IBC (“Application”) should meet the eligibility criteria as laid down under the IBC and the allottee must be able to prove that the developer has defaulted[1].
The allottees should initially make out an application demonstrating a “default” which shall include amounts due and payable to the allottee.Tatva Legal, Hyderabad has an experienced team of lawyers who, amongst other services, advise on transactions covering multiple practice areas such as insolvency and bankruptcy, real estate transactions including RERA compliance and title due diligence, and legal advisory for financing related activities specific to real estate projects.
Since then, the Modi government is working towards recovering the loans and stabilizing the banks.
One such major step was the Insolvency and Bankruptcy Code (IBC) passed in 2016.
Broadly two methods are seen- Resolution and Liquidation.
Broadly, the IBC has been much effective than any of the previous loan recovery mechanisms like Debt Recovery Tribunals, Corporate Debt Restructuring Scheme, Joint Lenders’ Forum, S4A, etc.
The quarterly newsletter released by the Insolvency and Bankruptcy Board of India for the quarter ending on 30th September shows a great detail about the work going on under IBC.
Operational Creditors are those who have lent to the defaulting company for covering operational expenses like salaries, dues, purchasing of raw materials, inventory management and sales.
With the advent of insolvency and bankruptcy code, every business should take ahead the initiative to manage insolvency.
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