News: Homebuyers can approach NCLT under Insolvency and Bankruptcy Code: SC-09-08-2019
Updated On: August 09, 2019
The apex court said that the Section 5 (8)(f) does not infringe Article 14 & 19 (1) (g) of Real Estate Regulatory Act (RERA) and is not in derogation of any act. In case of any conflict between RERA & IBC, later prevails, SC said.
NEW DELHI: In a landmark judgement, the Supreme Court of India on Friday upheld the constitutional validity of Section 5(8) (f) of the Insolvency & Bankruptcy Code.
The Section 5(8) (f) of the IBC Code gives right to the homebuyers to approach the National Company Law Tribunal (NCLT). It gives home buyers the right to be considered as 'financial creditors'.
The amendment made to IBC was challenged by as many as 136 builders through writ petitions which were attached to the original case filed by Pioneer Urban Land and Infrastructure against Union of India and home buyers.
"This will be a remedy against all those projects which have been delayed and builders who do not intend to return the money to the buyers or complete the construction. Further, this law will endeavour to resuscitate the companies who have abandoned the projects after collecting huge amount of money from the innocent homebuyers or companies who cannot deliver on their promises," said advocates Aditya Parolia and Piyush Singh of PSP Legal, Advocates and Solicitors, who were representing around 400 home buyers in the matter.
The apex court said that the Section 5 (8)(f) does not infringe Article 14 & 19 (1) (g) of Real Estate Regulatory Act (RERA) and is not in derogation of any act. In case of any conflict between RERA & IBC, later prevails, SC said.
The bench of justice Rohinton Fali Nariman, Justice Surya Kant and Justice Sanjiv Khanna said that home buyers can avail any of the remedy i.e. Consumer Protection Act, IBC or RERA.
“It is a landmark judgement which will have lasting impact on the real estate industry. Several home buyers who have been denied their home can now approach IBC or RERA without any hassle. This will also resume all the delayed judgments in NCLT and NCLAT,” said Ashwarya Sinha, advocate representing around 100 home buyers.
"IBC is very progressive in nature and it will not only restructure the real estate industry but also will create a deterrent on fraudulent builders," said Parolia.
The apex court has also stayed all the insolvency resolution proceedings in NCLT and NCLAT until all application are taken-up individually by them.
The SC has directed the central government to make all appointments in RERA within three months and at the same time has asked them to man-up NCLT & NCLAT.
Union of India was represented the Solicitor General of India and Additional Solicitor General of India in the matter.
The apex court also laid the procedure saying that first prima facie debt is to be made out then the onus shifts on the builder to prove below mentioned:
1. Fraudulently initiated proceedings
2. Allottee is in default
3. Allottee in order to avoid loss from deteriorated real estate is trying to withdraw investment and therefore has initiated the proceedings
4. Speculative investor
5. Allottee has taken coercive measure to get investment back
