The Ministry of Corporate Affairs proposed to set up a threshold for home buyers for starting insolvency proceedings against builders with an aim to minimise the misuse of Insolvency and Bankruptcy Code (IBC). In this context, Secretary of Corporate Affairs, Injeti Srinivas, said the ministry is also mulling creation of a hybrid system of the auction of properties and making the system more transparent and free from legal hassles.
The Secretary was briefing reporters here following a meeting between Finance Minister Nirmala Sitharaman with bankers on IBC issues. The meeting, at which he was present, also discussed the treatment of operational creditors under the IBC which has been a bone of contention.
Putting the light on the present position of Insolvency and Bankruptcy Code (IBC), Srinivas stated that feedback from the Housing and Urban Affairs Ministry and other quarters like real estate industry suggest that this option has to be looked into. He suggested that some threshold approach need to be followed.
The data shared during the press conference revealed that in the last three years 21,000 cases have come up for IBC. Of these, nearly 10,000 cases have been settled, 8,500 prior to admission and about 1,500 cases were resolved and over 1,500 cases are going on. The whole issue of the system is getting clogged.
“These are real issues, but the typical approach, which will be beneficial, is that the cases that involve large outstanding where the IBC is the best option should be actually taken recourse to to it. Things which are not having smaller outstanding can be better settled outside the IBC. The IBC is a rigorous process with a lot of phases,” Srinivas observed.
“The possibility of a formula-based distribution (of assets) which is fairly elaborate can give the best option and reduce litigation and reduce time for litigation with (section) 29A getting settled beyond doubt, the only litigation area essentially is who gets how much, if that can be resolved in an effective manner that could be the real thing,” the official concluded.