India: The Insolvency And Bankruptcy Code (Amendment) Bill, 2019 And Its Effect On Homebuyers

Last Updated: 8 August 2019
Article by Manisha Paranjape and Abhijeet Kamath

The Insolvency and Bankruptcy Code, 2016 ("Code") is to be amended by the Insolvency and Bankruptcy Code (Amendment) Bill, 2019 ("Amendment") that was passed by both houses of Parliament recently. The Amendment carries out various modifications to the Code in order to maximize the value from the Corporate Insolvency Resolution Process ("CIRP").

Briefly, the highlights of the Amendment are as follows:

  • Clarity that a resolution plan ("Resolution Plan") can provide for comprehensive corporate restructuring schemes such as mergers, demergers, amalgamations
  • the Amendment to Section 12 of the Code provides for an absolute deadline for completion of CIRP within 330 days, including litigation and other judicial processes. If any CIRP is in process on the date of commencement of the act bringing the Amendment into force ("Amendment Act") and is pending over 330 days, it must be completed within 90 days from the date of commencement of the Amendment Act.
  • The Amendment to Section 30 lays out a mandatory requirement for Resolution Plans to provide for payment to operational creditors of a minimum of either (i) the amount payable to such creditors on liquidation under Section 53 of the Code or (ii) such amount as would have been payable to such creditors if the total amount distributable under the Resolution Plan is treated as liquidation proceeds and paid in accordance with the priority laid down in Section 53.
  • Further, the Amendment to Section 30 also mandates a requirement for Resolution Plans to provide for payment to dissenting financial creditors of at least the amount payable to such creditors on liquidation under Section 53 of the Code.
  • The Amendment to Section 25A of the Code provides that, for cases where an authorised representative represents a class of financial creditors on the committee of creditors, such representative will vote on behalf of the entire class on the basis of the decision taken by a majority of the creditors, present and voting, that they represent.

In this article, we focus on one of the most pivoting amendment which is the aforesaid amendment to Section 25A of the Code. In our earlier article titled "Homebuyers Now Financial Creditors: Too Many Cooks Spoil The Resolution Process?" ("Article") one of the drawbacks highlighted by us was the requirement of the vote of each homebuyer being calculated individually in proportion to the individual debt owed to him and not as a class of financial creditors. It has been seen in the case of IDBI Bank Limited versus Jaypee Infratech Limited read with the disclosure provided by Jaypee Infratech Limited to the Bombay Stock Exchange dated 23rd October, 2018, that none of the agendas put forth before the Committee of Creditors ("CoC") was approved, mainly due to many homebuyers failing to exercise their votes and thus, the remaining financial creditors (including homebuyers who did cast their vote) were not able to form the requisite majority (calculated on total debt share). In such a scenario, if no Resolution Plan is approved, the corporate debtor has to be liquidated. On liquidation, homebuyers being unsecured creditors would stand to lose priority to secured financial creditors such as financial institutions.

In a move set to definitely benefit classes of creditors such as homebuyers, the Amendment now rectifies this issue by empowering the authorised representative to cast the vote of the entire class of creditors represented by him in accordance with the decision approved by more than 50% of such class of creditors on a present and voting basis.

As an example, let us presume there are 1000 homebuyers in any given real estate company undergoing CIRP, where the collective debt of the 1000 homebuyers forms 70% of the total debt of all financial creditors. Out of these, 300 homebuyers attend a meeting of the CoC and 270 of such homebuyers, vote in favour of a particular agenda.

Now, pre- Amendment, the vote of the 270 homebuyers who voted in favour of the agenda would only count to the extent of their respective individual debt share. Thus, although in our example, almost all homebuyers who were present had voted in favour of a particular agenda, the fact that a large number of homebuyers abstained from voting would lead to failure to garner the minimum required percentage for approving that particular agenda. This might not present itself as an issue when minor decisions of the CoC are affected, however in a vote for the approval of a Resolution Plan, such a mechanism for calculating the vote would undoubtedly hinder the effectual resolution of any company undergoing CIRP.

However, post-Amendment, in our example, because the majority of the homebuyers, i.e., 270 homebuyers out of the 300 present and voting have voted in favour of the agenda, the vote of the entire class of financial creditors i.e. of 1000 homebuyers forming 70% of total debt share would be cast by the authorised representative in favour of the agenda. Thus, now the authorised representative is required to extrapolate the vote of the 270 homebuyers, to all the 1000 homebuyers being a class of creditors, and backed by the entire voting share of this class, the vote of the collective class of creditors being homebuyers would undoubtedly carry more weight and actually lend meaning to homebuyers becoming part of the CoC.

In our view, this Amendment would undoubtedly cause resolution applicants to ensure that the interests of this unique class of creditors is protected and will also encourage all homebuyers to exercise their rights responsibly and actively participate in the CoC meetings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions