The Lok Sabha has passed the Insolvency and Bankruptcy Code (Second Amendment) Bill 2018.
The Ordinance amends the Insolvency and Bankruptcy Code, 2016 to clarify those allottees under a real estate project should be treated as financial creditors.
The voting threshold for routine decisions taken by the committee of creditors has been reduced from 75% to 51%. For certain key decisions, this threshold has been reduced to 66%.
The Ordinance allows the withdrawal of a resolution application submitted to the NCLT under the Code. This decision can be taken with the approval of 90% of the committee of creditors.
Key Issues and Analysis
The rationale for classifying allottees under a real estate project as financial creditors may be questioned. Further, the Ordinance does not clarify whether allottees are secured or unsecured financial creditors. In the absence of allottees having a clear status, there may be uncertainty about their priority when receiving dues from the insolvency proceedings.