[Jan] IBC & Homebuyers Flashcards
Rules by previous IBC & current ammendements?
1.home-buyers are financial creditors,who give money in form credit to builders.
Homebuyers (those who have paid money to the builders and have not got the possession as per the promised time) are practically “operational creditors” but as per previous SC judgement they are treated like “Financial Creditors”.
2.Homebuyers (those who have paid money to the builders and have not got the possession as per the promised time) can move to NCLT under IBC 2016 to initiate insolvency/bankruptcy against the builder if there are 100 such homebuyers or 10% of such allottees which ever is minimum. This has been done so that to prevent a few potentially unscrupulous elements within the home-buyer community from abusing the spirit of the IBC by unsettling real estate companies at the behest of or in connivance with rival firms.
2 types of creditors?
“Financial Creditor”: An institution (Banks/NBFCs) which has given loan to a company/business entity, is called financial creditor to the company
“Operational Creditor”: If IOCL has sold fuel to Air India and, Air India has not paid money to IOCL, then IOCL is Operational Creditor to Air India.
Who can initiate insolvency proceedings?
A Financial creditor, operational creditor, or a corporate debtor (who has borrowed money) anyone can initiate insolvency proceedings upon any default made by the corporate debtor.
how the resolution proceeds will be shared among financial and operational creditors?
Committee of Creditors (CoC) consists of only financial creditors (like banks, NBFCs etc.). But the proceeds/money from the resolution process is shared by the financial and operational creditors both. Only CoC will decide how the resolution proceeds will be shared among financial and operational creditors and NCLT will not have any say. NCLT cannot interfere in the merits of the commercial decision taken by the CoC but a “limited judicial review” was possible to see that the CoC had taken into account, inter alia, the fact that the interest of all stakeholders, including operational creditors had been taken care of.
