Homebuyers can name rep to decide stressed co’s fate
NEW DELHI: Homebuyers and depositors in companies facing insolvency action will get to nominate their representative from a panel of three insolvency professionals to represent them on the committee of creditors (CoC) — the decision-making body that decides the fate of stressed companies.
The move follows an amendment to the Insolvency and Bankruptcy Code (IBC) in the wake of action against realtors such as Jaypee Infratech and Amrapali, with homebuyers now given a representation in the committee of creditors to have a say in deciding the fate of the stressed company. Earlier, the fear was that lenders who were the sole representatives will put together a deal that does not factor in the interests of other stakeholders.
The rules notified by the regulator Insolvency and Bankruptcy Board of India (IBBI) stipulate that every category of creditor — including depositor, security holder and homebuyer in case of a housing company — which has at least 10 entities or individuals will get to nominate its representative in CoC. “The insolvency professional, who is the choice of the highest number of creditors in the class, shall be appointed as the authorised representative of the creditors of the respective class,” it said in a statement.
IBBI has also given detailed norms for the resolution professional to decide the evaluation matrix, given that there have been accusations of favouritism in some of the cases that are currently being decided. “The request for resolution plans (RFRP) shall detail each step in the process, and the manner and purposes of interaction between the resolution professional and the prospective resolution applicant, along with corresponding timelines,” it said.
The resolution plan prepared by bidders will have to show how the reason for default is being addressed, whether it’s feasible and viable, provisions for its effective implementation and capability of the applicant to implement it, among other things.
As reported by TOI, the guidelines are seen to have come in the wake of the initial cases, especially the high-profile ones getting delayed, prompting the government to suggest that detailed norms should be issued, much like the Companies Act. It is also aimed at ensuring transparency in the process and protection to members of CoC. The rules have also provided a detailed timeline for each action to ensure that the whole process is completed within the 180-day deadline provided in the law.