SC approves status of homebuyers as financial creditors

New Delhi: In a big boost for homebuyers, the Supreme Court on Friday upheld the amendment in the Insolvency and Bankruptcy Code (IBC), which gives homebuyers status of financial creditors on par with creditors’ banks.
More than 200 real estate developers had moved the apex court referring to this amendment as “illegal and unconstitutional.” The amendments to IBC deem allottees of real estate projects to be “financial creditors”, and they may trigger the Code, under Section 7 against the real estate developer. In addition, being financial creditors, they are entitled to be represented in the Committee of Creditors by authorised representatives.
Upholding the amendment to IBC and terming it as not arbitrary in nature, a bench headed by Justice R.F. Nariman observed that the plea of trigger-happy homebuyers attempting to begin insolvency proceedings against the real estate companies should not be entertained by courts, instead pleas which are genuine in nature shall be allowed.  “The Real Estate Registration Act (RERA) is to be read harmoniously with the Code (IBC), as amended by the Amendment Act. It is only in the event of conflict that the Code will prevail over the RERA. Remedies that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code,” said the court in its judgement.
This could be interpreted that IBC is an additional platform for homebuyers to register their grievances against the real estate developers. The court rejected real estate companies’ arguments that the amendment has given uncontrolled powers to the homebuyers.