- Posted by Arpit Marwah
- On August 19, 2019
- 0 Comments
- Supreme Court upholds home buyers
Big victory for the home buyers as the Top Court on Friday upheld the Government’s amendment in IBC whereby home buyers were given the status of financial creditors. Now, the home buyers can take the guidance and relief from the three regulating law bodies- RERA (Real Estate Regulation Act), Consumer Protection Act and IBC. This amendment will prove as a milestone for the home buyers because they can file the petition for restructuring the company if the home buyers lose confidence in the management of the builder.
This will be a game-changer because home buyers who are waiting for their houses for many years and the builders who were not doing any work on the ground level. Now, home buyers at least have the opportunity to process the change in the management and to get their houses,” Said Shobit Chaudhary, Advocate-on-Record.
The apex bench verdicts that only genuine buyers can invoke Insolvency Proceedings against the builder. Moreover, they can treat them on a par with banks and institutional creditors besides protecting their rights. The bench said that RERA Act has to be read ” harmoniously with the Consumer Protection Act and IBC (if any dispute occurs, IBC will prevail).
So, the challenge to the amendments were made when the Government introduced the changes in the IBC by the way of considering allot tees of real estate companies as financial creditors as per section 7. Where, this amendment was passed by the way of an ordinance in 2018 and later on affirmed by the parliament. Then, Pioneer Urban Land and Infrastructure approached the Supreme Court by challenging the validity of this amendment. In addition to, over 180 developers filed a written petition against this amendment to the Supreme Court.
Why they all challenged the amendment of this law because this amendment will now enable the home buyers with the rights where they can take legal steps against real estate developers if they found themselves in “Default Debt Repayments.” The developers said that this amendment is making them confused as what is the right definition of “Default” here?
Real estate firms argued that if due to any reason, the project gets delayed then the definition of default becomes vague where the delayed delivery may be from the buyer’s default in paying the installments. They again put questions regarding the category given to home buyers as secured or unsecured home buyers.
Builders also said,” Such cases when referred to Insolvency Forum in case of “Default Debt Repayments” turns into abuse of process of law and also sometimes lead to delay in project delivery.”
To solve the above queries of builders and real estate firms, the Supreme Court held that before moving to NCLT and NCLAT, it is not legally authenticated that any random home buyers without any relevant reason can misuse the provision of this law. Then, the Supreme Court rejected their pleas and held the verdict of rightly allotting the category of home buyers as a financial creditor with this grantees and affirmation that only genuine home buyers can initiate the Insolvency Proceedings against the developers only.
Under the IBC Code as per section 7, home buyers has the right to change the management of the developer also they can initiate Insolvency Proceedings and approve or disapprove plan or force liquidation of the company.
This is a landmark judgement which would shape the real estate industry for the better. It is a huge relief for the home buyers who will have the remedy particularly against the defaulting developers. We are thankful to the bench for giving the home buyers an opportunity to present their case in support of the Union of India and the amendment to the Insolvency and Bankruptcy Code,2016,” also said by Shobit Chaudhary.
The SC judgement re-affirms the rights of the home buyers as financial creditors under IBC. This is a landmark Judgement so far as genuine home buyers are concerned. However, this may not be happy news for the investor home buyers who have initiated IBC against the developers seeking exit from their investments on account of the current condition of the real estate market,” said Abhilash Pillai, Partner Cyril Amarchand Mangaldas.