Three Members Of IBC Panel Dissent Against Curtailing Homebuyers Right To Initiate Insolvency

Three members of a parliamentary panel, including one from Prime Minister Narendra Modi's Bharatiya Janata Party, have objected to changes in the bankruptcy law that restrict homebuyers from moving insolvency court.

In a dissent note to the report of the Standing Committee on Finance on the Insolvency and Bankruptcy Code, TK Rangarajan, Rajya Sabha member representing the CPI(M), has written that the amendments curb the right of homebuyers as an operational creditor. His opinion was part of the report of the Jayant Sinha-led panel.

Thousands risked losing their lifetime savings as developers including Jaypee Infratech Ltd. went insolvent and couldn't complete projects. To protect their interests, the Supreme Court granted them the status of financial creditors. The government, however, amended the law, retrospectively, in 2019. That required a minimum of 100 homebuyers or 10 per cent of the total to file bankruptcy proceedings. The owners of homes in stalled projects and flat-owners lobby opposed the move and even wrote to the prime minister against it.

The changes brought in by the government are against the Supreme Court's order, Manish Tewari, a Congress parliamentarian, said in his dissent note to the standing committee's report. “The government under pressure of lobbying from powerful builders and real estate developer lobby has tinkered with the Supreme Court judgment by introducing discriminatory thresholds in the IBC process,” he said. Tewari wrote that the draft report of the panel had suggested dropping this clause but due to opposition from within the committee, the proposal was deleted from the final report.

Another dissent note by BJP MP Rajeev Chandrasekhar said that the clause restricting the rights of homebuyers should be dropped as it distorts the principle of “equal rights guaranteed under the Constitution”.

In its report, the panel suggested that the payments due to small businesses which are operational creditors and not included in the Committee of Creditors, should be ensured on priority in the course of the resolution process itself before the liquidation stage kicks in.