There is lack of clarity around voting rights for home buyers in real estate companies, such as Jaypee Infratech and Amrapali, even though the Insolvency and Bankruptcy Board of India (IBBI) has issued a circular mandating only those who have submitted claims of their property to be treated as part of the electoral college (committee of creditors) to vote on key resolution.
While the government has amended the Insolvency and Bankruptcy Code (IBC) to treat home buyers as financial creditors, who will have a say in all crucial decisions, the law mandates that those who abstain will be treated as a negative vote. This clause is proving to be a problem in case of home buyers, as decisions such as deciding on the new buyer (for the company), require 66% affirmative votes, insolvency experts said.
In order to pass a resolution in the case of Jaypee Infratech, two-third of representatives in the committee of creditors, the apex decision-making body under IBC, will need to vote in favour of it. Home buyers have over 60% say on the panel. If 10,000 of the 25,000 home buyers abstain from voting, the resolution will be defeated. In the just concluded round of voting, less than 7,000 home buyers voted.
Sources said there are thousands of home buyers who did not file their claims in the first round. In the second round, so far, only just around 2,000 of home buyers have filed their claims and even some of the financial institutions have not done so, arguing that their claims were admitted a year ago.
To address the problem, IBBI has now come up with the suggestion that only those who submit their claims will be treated to be members of the committee of creditors. This step will reduce the number of votes needed to reach the target of 66% of the “admitted” voters.
Insolvency experts said even this may be tough to achieve, given that voting is open only for a day and everyone may not be on the same page. In Jaypee Infratech, there are close to over a dozen home buyer associations and they do not seem to agree on everything.
“The solution lies in only taking the affirmative votes,” said an insolvency lawyer. IBBI sources, however, pointed out that the law needed to be amended to push through the change.