On June 4th 2019, DHFL defaulted on ₹900cr ($122.6m) worth of due payments. Its CPs’ rating was downgraded to “D” overnight and a long and painful reckoning commenced, which has sent its share price into a tailspin.
Today, as we wait for the NBFC's creditors to reach a verdict on who gets to buy DHFL's assets, one can only hope that 2021 will be kinder on India’s NBFCs, let alone on DHFL.
DHFL's fall from grace, insolvency proceedings and the prolonged bidding process for sale of its assets constitute a saga that continues to this day.
How did the lender find itself in its present situation? Click link to learn:
https://transfin.in/the-dhfl-crisis-explained-what-happened-to-the-nbfc
The amendment to the Insolvency and Bankruptcy Code, 2016, (“IBC”) dated March 13, 2020, deemed to be in effect from December 28, 2019 (“IBC Amendment”), provides relief to homebuyers by considering homebuyers as ‘financial creditors’ and allowing them to initiate the corporate insolvency resolution process (“CIRP”) under the IBC against the developer.
This article analyses the remedies available to homebuyers against the developers of a real estate project in context of the aforesaid IBC Amendment and vis-à-vis the Real Estate (Regulation and Development Act), 2016.Precedence of proceedings under RERA and the IBCWhile the homebuyers may initiate CIRP against the developers, in view of the IBC Amendment, however, CIRP may be initiated only if the application is filed jointly by not less than: (a) 100 (one hundred); or (b) 10% (ten percent) of the total number, of such allottees under the same real estate project, whichever is less.Further, when any proceedings are initiated and subsequently admitted under the IBC, then the adjudication process envisaged under Real Estate (Regulation and Development Act), 2016 (“RERA”) may be done away with.
However, the application as filed by the allottee before the National Company Law Tribunal (“Tribunal”) under the IBC (“Application”) should meet the eligibility criteria as laid down under the IBC and the allottee must be able to prove that the developer has defaulted[1].
The allottees should initially make out an application demonstrating a “default” which shall include amounts due and payable to the allottee.Tatva Legal, Hyderabad has an experienced team of lawyers who, amongst other services, advise on transactions covering multiple practice areas such as insolvency and bankruptcy, real estate transactions including RERA compliance and title due diligence, and legal advisory for financing related activities specific to real estate projects.
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Since then, the Modi government is working towards recovering the loans and stabilizing the banks.
One such major step was the Insolvency and Bankruptcy Code (IBC) passed in 2016.
Broadly two methods are seen- Resolution and Liquidation.
Broadly, the IBC has been much effective than any of the previous loan recovery mechanisms like Debt Recovery Tribunals, Corporate Debt Restructuring Scheme, Joint Lenders’ Forum, S4A, etc.
The quarterly newsletter released by the Insolvency and Bankruptcy Board of India for the quarter ending on 30th September shows a great detail about the work going on under IBC.
Operational Creditors are those who have lent to the defaulting company for covering operational expenses like salaries, dues, purchasing of raw materials, inventory management and sales.
If you have decided to file for bankruptcy protection, need lawyers in India who experts in insolvency and bankruptcy law, the Consult with Ahlawat & Associates, who is one of the best Legal firms in India.
