STATUS AS ON 27/05/2019
In the recent past, home buyers find themselves in a very unfortunate situation by making any investment in real estate sector as majority of the projects were either abandoned or delayed for years.
The good news is that Insolvency and bankruptcy Law 2016, has categorised the home buyers debt as financial debt to the real estate company/builder and therefore, homebuyers can claim their dues as bank claims its debt.
Home buyer has been given the the status of financial creditor through an amendment in clause (8)F) section 5 of IBC. It allows home buyers to classify as financial creditors and thus a homebuyer can file an application to NCLT for initiating corporate insolvency resolution process against a defaulting Builders and gets their refunds.
In one of orders, the Hon’ble Supreme Court in writ petition (c) N0.43/2019 titled Pioneer Urban Land and infrastructure Limited & Anr. vs UOI had passed a stay order on all petitions filed before the NCLT against the Builders. Thereafter, the homebuyers were uncertain about whether the option was available to them to approach NCLT or not.
Now, the NCLT, Principal Bench, New Delhi in the case Vijay Kumar Suri & Ors vs Earth Buildprop Pvt. Ltd has made the following important decisions while interpreting the stay order of the Hon’ble Supreme Court in writ petition (c) N0.43/2019 titled Pioneer Urban Land and infrastructure Limited & Anr. vs UOI and held:-
- That the order passed by the Hon’ble Supreme Court in writ petition (c) N0.43/2019 titled Pioneer Urban Land and infrastructure Limited & Anr. vs UOI staying the proceedings before the NCLT will not be applicable to all the cases of corporate insolvency resolution process by homebuyer against the builders.
- That the Supreme Court has not put any stay on operation of 5(8) (F) under which the home buyers can approach NCLT for their refunds.
- That if there are unreasonable or extraordinary delays in the project i.e more than one year, then applying the principle of reasonableness, the petition can be filed for insolvency of builders in accordance with IBC Laws.
- That home buyers can approach the NCLT against the builders if that particular builders has not being party to the Writ Petition titled Pioneer Urban Land and infrastructure Limited & Anr. vs UOI.
Conclusion:- In light of the aforesaid case law and under the provisions Insolvency and bankruptcy law 2016, homebuyers have option to approach the NCLT against the builders for initiation of corporate insolvency resolution process if there is an extraordinary delay of more than one year in delivering possession of the residential property and claim their refunds.