IBC: Parliamentary Panel Recommends Greater Informational Transparency So Aggrieved Buyers Can Seek Liquidation Of Builder's Assets

A parliamentary panel has recommended that the government introduce a provision in the Insolvency Bankruptcy Code (IBC) making it mandatory for builders to provide details of all customers in a project, if a single homebuyer decides to file for the builder’s bankruptcy resolution in the National Company Law Tribunal (NCLT).

According to a 2018 amendment to the IBC, a minimum of 100 homebuyers or 10 per cent of the total purchasers, whichever is less, are needed for initiating the insolvency process.

The Forum for People’s Collective Efforts (FPCE), which had campaigned for the enactment of the real estate law (RERA), had submitted to the Parliamentary Standing Committee on Finance how this provision is impractical and puts homebuyers in a disadvantageous position compared to builders.

The panel, which studied the “pitfalls” in the implementation of the IBC, said in its report that homebuyers are facing practical difficulties in gathering the required number of purchasers to initiate insolvency proceedings against the real estate owner.

"The committee, therefore, recommends that once a single homebuyer decides to initiate insolvency proceedings in NCLT, the real estate owner should be obliged in the Rules and Guidelines to provide details of other homebuyers of the project to the homebuyer concerned so that the required 10 per cent or 100 homebuyers can be mobilised, which will thus ensure that the interest of homebuyers is protected,” the panel said in the report, which was tabled in Parliament last week.

The expectation of the industry from the government is to find a solution to the problem. If the ceiling can be reduced to certain minimum homebuyers, it will help people whose savings are stuck in real estate projects for no fault of theirs.