NEW DELHI: The Supreme Court on Friday upheld amendments to the Insolvency and Bankruptcy Code on Friday, giving homebuyers the status of financial creditors, while dismissing the plea by over 180 real estate companies against the amendments.
A group of realtors, including Pioneer Urban Land and Infrastructure, Supertech, BPTP, Today Homes Noida, Ireo, CHD Developers, ATS among others had moved the apex court against the IBC amendments, which allowed homebuyers to take a developer to the bankruptcy court. They pleaded that remedies to homebuyers were available under the RERA Act and the amendments to IBC were not needed.
Their plea was rejected by an SC bench headed by Justice RF Nariman, stating consumers should have the option of seeking remedy under any provision — the Consumer Protection Act, IBC or RERA.It added that the RERA Act, which regulates the real estate sector, should be read harmoniously with the amendments made in the IBC and in case of conflict, the Code would prevail. It also recognised the rights of homebuyers who contribute equally in the financing of any real estate projects.
The bench clarified that only genuine homebuyers can invoke insolvency proceedings against a builder.
This means if a realty firm goes bankrupt, homebuyers will be treated at par with banks and other institutional creditors and will be given priority in recovering dues from the company.
This also will ensure buyers a seat at the Committee of Creditors’ table, enabling them to be a party in the resolution process for a real estate firm which goes bankrupt.“The effect will be beneficial to both lenders and consumers,” Niranjan Hiranandani, President, NAREDCO said.
A seat at high table
Homebuyers will now have a seat at the Committee of Creditors’ table, which decides on the resolution process. This means homebuyers will have a say in the resolution process for their bankrupt builder. In other words, as financial creditors now, they will have a say in the resolution process of a cash-strapped realtor