As of 31 March, 525 corporate debtors were undergoing resolution under the Insolvency and Bankruptcy Code, 2016. Resolution plans had been approved for 22 of them and 87 liquidations had commenced, all in 15 the months since proceedings under the code commenced. Based on early experience with the code and recommendations in a recent report by the Insolvency Law Committee, the Insolvency and Bankruptcy (Amendment) Ordinance, 2018, was promulgated by the president on 6 June.
On the applicability of the Limitation Act, 1963, to proceedings under the code, the ordinance has set to rest uncertainty resulting from decisions by the National Company Law Appellate Tribunal by introducing section 238A to the code, confirming the applicability of the Limitation Act to insolvency proceedings.
The ordinance deals with the definition of “financial debt” in section 5(8)(f) and in the explanation gives amounts raised from “allottees” under “real estate projects” the effect of commercial borrowings, as defined in the Real Estate (Regulation and Development) Act, 2016. This gives home buyers the opportunity to appoint authorized representatives to represent them in the committee of creditors. While this clarification allows improved recovery to home buyers under the section 7 of the code, it will be important to see if the legislative intent is met as they will be classified under unsecured financial creditors.
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