The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019, is discriminatory as it doesn’t treat home buyers at par with other financial creditors and violates a Supreme Court ruling on the issue, three members noted in dissent notes filed by them to the report on the bill tabled by the Standing Committee on Finance, headed by BJP leader Jayant Sinha, in Parliament on Wednesday.
The bill has introduced a new clause that sets a threshold of a minimum 100 homebuyers or 10% of total homebuyers in a project, whichever is less, as a requirement to jointly take the developer to an insolvency court. This means that an individual homebuyer, who is a financial creditor, cannot file an insolvency application.
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Out of the committee’s 32 members, three MPs including Congress MP Manish Tewari, CPI(M) member T. K. Rangarajan and the BJP’s Rajeev Chandrasekhar filed dissent notes. Mr. Tewari accused the chairman, Mr. Sinha, of not recording the committee’s sentiment that this clause should be dropped. “The draft report of the Standing Committee had proposed the same but due to opposition from within, it is being now deleted from the final report,” Mr. Tewari asserted.
Mr. Rangarajan in his two-page dissent note noted that the proposed bill denies homebuyers of their relevant rights. “The entire amendment is completely illogical and is against the very principle of the Insolvency Code to treat incipient sickness,” Mr. Rangarajan said. He also observed that no relief had been offered to homebuyers from repayment of bank loans if the developer failed to deliver. He also wondered how was a homebuyer expected to calculate the 10% threshold, if there was no law to mandate display of the list of buyers on a web portal.
Both the Opposition members of the panel accused the government of coming under pressure from the builders’ lobby.
In his dissent note, Mr. Tewari said that the law undermines the Supreme Court ruling that gave rights to homebuyers “by turning an individual remedy into a class action”. “It ignores the ticket size of a homebuyer’s investment into a real estate project and reduces him to a numerical as opposed to a creditor”. The amendment violated the right of millions of voiceless homebuyers who found their life savings ripped and misappropriated by unscrupulous builders and real estate developers, the Congress MP asserted.
The BJP’s Mr. Chandrasekhar said that the demand of homebuyers to be treated at par with financial creditors was a justified demand. The new law was, thus, a case of “distortion of the principle of equal rights guaranteed under the Constitution,” Mr. Chandrasekhar argued.
