AMENDMENTS IN IBC

AMENDMENTS IN IBC

Subject: Governance

Context: The Supreme Court on Tuesday upheld amendments in the Insolvency and Bankruptcy Code which prescribe that at least 100 allottees from the same real estate project should support the initiation of corporate insolvency resolution process in NCLT against their property developer.

Concept:

• The Insolvency and Bankruptcy Code (Amendment) Act of 2020 had introduced a threshold that required a minimum of 100 allottees, or 10% of the total allottees of a project, whichever was less, to jointly apply for corporate insolvency resolution in the NCLT.
• The allottees should be from the same real estate project. Aggrieved allottees drawn from different projects of the same developer cannot form the 100.

About IBC:

• Insolvency and bankruptcy code 2016 was introduced to resolve the bankruptcy crisis in corporate sector.
• Under IBC, either the creditor (banks) or the loaner (defaulter) can initiate insolvency proceedings.
• It is done by submitting a plea to the adjudicating authority, the National Companies Law Tribunal (NCLT).
• According to IBC, a financial creditor holds an important role in the corporate insolvency process.
• The Committee of Creditors (CoC) under IBC includes all financial creditors of a corporate debtor.
• The CoC will appoint and supervise the Insolvency Professional.
• It has the power to either approve or reject the resolution plan to revive the debtor, or to proceed to liquidate the debtor.