New Delhi: The Union Cabinet on Wednesday approved the promulgation of an ordinance to amend the 16-month old Insolvency and Bankruptcy Code, 2016.
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 will protect the interest of home buyers by treating them as financial creditors which will make it easier for them to recover their investments.
With realty firms, such as Jaypee Infratech, facing insolvency proceedings, the ordinance, once approved by President Ramnath Kovind and promulgated, will provide relief for home buyers facing hardships due to incomplete real estate projects.
Under the code, financial creditor implies any person to whom a financial debt is owed. The financial debt can include money borrowed for interest.
Also it will help micro, small and medium enterprises to turnaround faster by giving them a special dispensation in the insolvency process. Exemption from various provisions in the resolution process will help them turnaround faster keeping in mind their smaller scale and importance to the Indian economy, official sources said.
The NPA resolution process has already seen major success. The recent resolution of one of the largest NPAs, Bhushan Steel to Tata Steel under this Code has already helped banks and other lenders recover Rs 36,400 crore in cash and further 12 per cent equity stake in the company.
With these amendments, this process is expected to become even more streamlined and ultimately help banks, an important pillar of the economy, to recover NPAs and help the economy move towards faster growth.
The present amendment is based on recommendations of a 14-member government appointed committee that had last month suggested a slew of measures, including addressing woes of home buyers and making recoveries easier for lenders.
Briefing reporters after the meeting of the Union Cabinet, law and justice minister Ravi Shankar Prasad said, “it’s a new legislation...The Cabinet has approved it.” He, however, refused to divulge further details citing Constitutional provisions.