Why Homebuyers' opposing amendment in insolvency law?

Forum for People's Collective Efforts has written to a Parliamentary panel on finance, opposing an amendment in the insolvency law that seeks to insert a minimum threshold for flat owners to approach the NCLT against builders who have defaulted.

New Delhi: Homebuyers' body FPCE has written to a Parliamentary panel on finance, opposing an amendment in the insolvency law that seeks to insert a minimum threshold for flat owners to approach the National Company Law Tribunal (NCLT) against builders who have defaulted.

Forum for People's Collective Efforts (FPCE) has written a letter to Jayant Sinha, who is the chairperson of Standing Committee on Finance.

The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019, which proposes to amend IBC, 2016, was introduced in the last session of Parliament. The bill has now been referred to the Standing Committee on Finance.

An ordinance in this regard was promulgated in December a bill could not be passed in the last session. The ordinance had introduced a minimum threshold of at least 100 allottees of the same real estate project or 10 per cent of total allottees under that project, whichever is less, for moving a joint plea seeking initiation of insolvency process against the realtor.

"We vehemently oppose the proposed amendments/insertions specified in clause 3 of the proposed Bill which seeks to amend section 7 of IBC, 2016," FPCE President Abhay Upadhyay said.

"The said amendment/insertions require a minimum threshold for homebuyers to come together in order to initiate proceedings under the code against any real estate developer/companies. This is against the interest of homebuyers as it puts unreasonable conditions on them, destroys level playing field which currently exists and makes the law lop-sided in favour of real estate developers," he added.

The association termed the amendment as "illogical, illegal and regressive".

FPCE said the amendment to insert a minimum threshold for homebuyers to approach the NCLT is ridden with practical difficulties and listed out various problems.

"Sale is a continuous process. How will a homebuyer know how many units have been sold to determine the 10 per cent of total number of units sold in real estate project specially in a situation when 10 per cent is less than 100?" it asked.

The association said it would be difficult for a buyer to find the contact details of the requisite number of buyers in the projects to start bankruptcy proceedings against the builder.

"Like the political parties do, it will neither be practical nor possible for homebuyers to stay in a hotel or a resort in order to keep their flock together," Upadhyay argued.

The association urged the parliamentary panel to suggest removal of such amendments/insertions against homebuyers from the Bill.

"We, also would like to request you to kindly give us an appointment for our delegation from pan India to depose before the Committee and present our case," said Upadhyay, who is also a member of Central Advisory Council, RERA, Ministry of Housing.

(PTI Report)