Cabinet approves Ordinance amending insolvency law

The Cabinet yesterday approved promulgation of an ordinance to amend the Insolvency and Bankruptcy Code (IBC). 

The code proposes to classify home buyers as financial creditors at par with lenders to help them quickly get refunds from defaulting companies. 

The present amendment is based on recommendations of a 14-member government appointed committee chaired by Corporate Affairs Secretary Injeti Srinivas that had last month suggested a slew of measures, including addressing woes of home buyers and making recoveries easier for lenders.

Under the code, financial creditor implies any person to whom a financial debt is



owed. The financial debt can include money borrowed for interest.Homebuyers will be treated at par with banks and institutional creditors and will be given priority while recovering dues from bankrupt or insolvent real estate companies. 

The move will help quickly recover investments in bankrupt real-estate companies and will benefit millions of homebuyers. The amendment comes months after a new Section 29A was added into the bankruptcy code in November, introducing four layers of ineligibility for potential bidders.

The ordinance will come into force once it is approved by the President.