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ARTICLE · 03 JULY 2018

Insolvency Code & Status Of Home-buyers: A Conundrum

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The Insolvency and Bankruptcy Code, 2016 ("IBC") was passed with the objective of balancing interests of all stakeholders in a corporate entity‟s insolvency resolution process.

IndiaInsolvency/Bankruptcy/Re-Structuring
Nikhil Issar
Nikhil Issar
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1. Introduction

The Insolvency and Bankruptcy Code, 2016 ("IBC") was passed with the objective of balancing interests of all stakeholders in a corporate entity‟s insolvency resolution process. In furtherance of this objective, the government passed the IBC (Amendment) Ordinance, 20181 ("Ordinance") on June 6, 2018. The Ordinance amends IBC to promote insolvency resolution over liquidation and streamlining provisions regarding eligibility for insolvency resolution, with specific focus on protecting interests of home-buyers2 and MSMEs. It seeks to include amounts raised from home-buyers in a real estate project ("Allotment Debt") within the ambit of "financial debt", in order to enable their claims as financial creditors. Financial debt is a debt disbursed against the consideration for the time value of money and includes transactions having the commercial effect of a borrowing.3 With inclusion of Allotment Debts as financial debts; it is widely perceived that the

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