IBC Ordinance does not apply to commercial real estate buyers, says Shroff

He says, objective of introducing homebuyers as financial creditors is to provide them a seat in committee of creditors so that their interests can be taken care of

An important member of a panel, Shardul Shroff and his panel’s recommendations have led to promulgation of an ordinance on insolvency law. The executive chairman of Shardul Amarchand Mangaldas, speaks about various aspects of the ordinance in conversation with Veena Mani. Edited excerpts:

How will homebuyers be represented in the Credit of Committee?  Does the ordinance also apply to the commercial real estate buyers?  

The ordinance has given homebuyers the status of financial creditors.  If there is a default, homebuyers have to first place a demand like a financial creditor, and then move the National Company Law Tribunal (NCLT) for corporate resolution under the Insolvency and Bankruptcy Code (IBC). A detailed procedure for nominating a representative of thousands of homebuyers will be included in the CIRP Regulations.  The ordinance will not be applicable to commercial real estate buyers.  The objective of introducing homebuyers as financial creditors is to provide them a seat in the committee of creditors so that their interests can be taken care of.

How will provisions of the ordinance on interim resolution help in the resolution process?

The ordinance also states that if an interim resolution professional (IRP) is to be replaced by a resolution professional (RP), his term of appointment will continue till the RP is recruited.  This will ensure that the time available during the resolution period will be utilised optimally, and not wasted between relinquishment of office of one IRP and the appointment of another RP.  This also enables continuity of management of the corporate debtor.

The ordinance has set two different thresholds for voting by the committee of creditors. How will it be judged as to what is a routine matter and what needs 66 per cent voting?

Routine matters such as raising interim finance with the approval of the committee of creditors can now be sanctioned by a simple resolution of 51 per cent votes. To approve the resolution plan, the committee of creditors still requires a resolution by 66 per cent of the members eligible to vote.

You were part of the panel that recommended that micro, small and medium enterprises (MSMEs) should be exempted from restrictions imposed on promoters and related parties as far as bidding is concerned. How will it work?

The MSME segment will have to be defined in the CIRP Regulations so that special concessions under Section 29A(c) of the IBC can be provided to them under the regulations.