Amendments to the IBC: Implications for real estate allottees
Distilled Policy Brief
- The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 was promulgated following recommendations from the Insolvency Law Committee set up in November 2017.
- The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018 classifies real estate allottees as financial creditors, allowing them to initiate corporate insolvency resolution and be represented on the committee of creditors.
- The Bill exempts or relaxes certain ineligibility criteria for resolution applicants regarding non-performing assets and guarantors specifically for Micro, Small, and Medium Enterprises.
🎯 Prelims High-Yield Examination Points
Under the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018, allottees under a real estate project are classified as financial creditors and can be represented on the committee of creditors by an authorised representative.
⚖️ Mains Analytical & Syllabus Linkages
Examine the implications of classifying real estate allottees as financial creditors under the Insolvency and Bankruptcy Code and discuss the challenges regarding their priority in liquidation.
🎯 UPSC Prelims Practice Drill
With reference to the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018, consider the following statements: 1. It classifies real estate allottees as financial creditors, thereby allowing them to initiate a corporate insolvency resolution process. 2. It provides that the amount raised from real estate allottees during the sale of a project is considered a financial debt. 3. It exempts or relaxes certain ineligibility criteria for resolution applicants specifically for Micro, Small, and Medium Enterprises (MSMEs). Which of the statements given above are correct?
- [A] 1 and 2 only
- [B] 2 and 3 only
- [C] 1 and 3 only
- [D] 1, 2 and 3
▶ Reveal Official Answer & Analytical Explanation
The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018 classifies real estate allottees as financial creditors, enabling them to initiate corporate insolvency resolution and be represented on the committee of creditors. The amount raised from allottees is considered to have the commercial effect of a borrowing, thus qualifying as financial debt. Additionally, the Bill provides exemptions or relaxations from certain ineligibility criteria for resolution applicants regarding non-performing assets and guarantors specifically for Micro, Small, and Medium Enterprises (MSMEs). Hence, all three statements are correct.
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.