Home buyers are now part of Financial Creditors: the road ahead

In a recent judgment, the Supreme Court has directed new proceedings for the Jaypee Infratech case. Under the Insolvency and Bankruptcy code, all cases need to be resolved under 180 days (270 days with a 90 day extension); and as the Jaypee Infratech case was almost at its end, an amendment by the Insolvency and Bankruptcy Board of India (IBBI) changed the tide of the proceedings. As the case was reaching the end of 180 days, an amendment which directed that home-buyers are part of Financial Creditors and in-turn part of the Committee of Creditors put things in perspective. Following arguments, the Supreme Court, using its inherent power took a monumental decision and ordered new proceedings for the Jaypee case.

Under the revised ruling, the Company Insolvency Resolution Process (CIRP) will begin again. This lays the ground not only for a sound insolvency process but also guarantees citizens the right to a fair fight. When the case was brought into court last year, homebuyers were not part of the resolution process. Through amendments that aimed to strengthen the code as well as taken into account the concerns of all parties, this has been a welcome change.

One could argue that the case is back to where it started, however it is critical to note the revolutionary change it has brought. Setting an example for future cases, it puts the concerns and the demands of the highly effected homebuyers in perspective.

The amendment itself is an example of the importance of homebuyers in the resolution process. The amount invested by the home-buyers far exceeds the amount loaned by the creditors and thus their say in the CIRP holds much importance. The proceedings of this case can set an example for all future cases and it will be a great step towards securing an individual’s and lender’s right.