New Delhi, With the Rajya Sabha on Friday passing the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018, the legislation has got Parliament’s approval as the Lok Sabha has already cleared it.
The Bill allows homebuyers to be treated as financial creditors as it defines a financial creditor as anyone who has extended any kind of loan or financial credit to the debtor, and clarifies that an allottee under a real estate project (a buyer of an under-construction residential or commercial property) will be considered as a financial creditor, as the amount raised from allottees for financing a real estate project has the commercial effect of a borrowing.
It provides that during the insolvency proceedings, a committee consisting of financial creditors will be constituted for taking decisions (by voting) on the resolution process.
The financial creditors will be represented on the committee of creditors by an authorised representative. These representatives will vote on behalf of the financial creditors as per the prior instructions received from them.
Secondly, the bill also bars a guarantor of a defaulter from being an applicant.