On June 6, 2018, the Government once again amended certain provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), by promulgating an ordinance (the 2018 Ordinance) which introduces sweeping changes to the both substantive as well as procedural aspects relating to the insolvency process. Some of the key changes are analysed below.
Homebuyers – A New Class of ‘Financial Creditors’
The 2018 Ordinance has amended the definition of ‘financial debt’ to include amounts raised from ‘allottees’ in respect of a real estate project (as defined under the Real Estate (Regulations and Development) Act, 2016 (RERA)). Accordingly, homebuyers will now be entitled to a seat on the ‘committee of creditors’ (CoC) of the corporate debtor. However, given the large number of homebuyers for a project, they will be treated as a class of creditors and be represented in the CoC by an ‘authorised representative’ to be appointed by the National Company Law Tribunal (NCLT).