The Government of India has amended the Insolvency and Bankruptcy Code (IBC) 2016 to grant the status of a “financial creditor” to a home buyer. On 06/06/2018, the allot tees in real estate projects were included under the category of financial creditor with an explanation inserted in section 5(8) of IBC, through IBC (Amendment) Ordinance, 2018. Now, the home buyer or allottee in the real estate project can initiate insolvency process as financial creditor.
The IBC ordinance puts home buyers on the same footing as any other stakeholder participating in a real estate project and grants them due representation in the committee of creditors.
HOW IBC MAY HELP HOME-BUYERS?
IBC provisions may be a great support to home buyers who are facing a delay in possession or non-refund of money etc. Let’s give a brief for some prevalent circumstances :
- Delay in possession–If the claim & default are being arisen out of the agreement or by order of any court/authority order, you can file the case under IBC to initiate insolvency process.
- The project is abandoned – If the project is abandoned, you may approach to NCLT under IBC to start corporate insolvency resolution process subject to the terms of the agreement and other legal parameters.
- Non-refund of the agreed amount – If the allotment letter or agreement gives the right to claim the refund of the given amount and such obligation qualify to be a default under IBC, the petition can be filed before NCLT under IBC for recovery.
The home buyers after attaining the status of financial creditor under the code have the right to invoke Section 7 of the IBC against an errant developer. By invoking section 7 of the IBC, the financial creditors can file an application in NCLT (National Company Law Tribunal) for initiating corporate insolvency resolution (CIRP) against a defaulting company. Also, the home buyers have representation in the committee of creditors through an authorized representative and they can expect fast tracking of pending court cases against leading real estate groups.