Govt. may alter insolvency law

Govt. may alter insolvency law

Context

The insolvency law might be amended depending on recommendations of the panel reviewing issues related to the legislation, including those pertaining to home buyers, a senior government official said.

What: Insolvency Law Committee

A 14-member panel, also chaired by Mr. Srinivas, is working to identify and suggest ways to address issues faced in the implementation of the IBC — which came into force in December 2016.

Skewed in favor of financial creditors

• There is a feeling that this law is skewed a little too much in favour of financial creditors
• It is not adequately addressing the requirements or expectations of other stakeholders
• According to him, competition, regulatory clearances, tax liabilities and other aspects would also be looked at.

Concerns

• “There are also apprehensions on whether this system [insolvency law] can be abused. Can somebody trigger this system for some sort of wrongful intent?”
• Among others, issues such as whether the insolvency process should be governed by liquidation value or enterprise value would also be looked into
• “What are the rights of home buyers? What is the capacity of insolvency professionals? These are among the issues that has to be seen,”

Homebuyers problems

• In recent months, there have been concerns about incomplete realty projects and consequent hardships faced by home buyers
• Some real estate firms are also facing insolvency proceedings.
• There have also been suggestions from certain quarters about having provisions that would help provide relief to home buyers.