Supreme Court Upholds Homebuyers' Rights As Financial Creditors Under Insolvency Laws

Edited by Sandeep Singh

09 Aug 2019, 02:23 PM IST

The country's real estate sector is struggling with low consumer spending (representational image)

The Supreme Court order comes at a time thousands of homebuyers have moved the court for possession of undelivered flats.
The top court rejected a plea by real estate companies, which had argued that lack of clarity on the definition of the term default in the RERA laws allows abuse of the IBC process by homebuyers.
Amendments to the Insolvency and Bankruptcy Code last month had allowed homebuyers the tag of financial creditors, giving a stronger voice to the homebuyers in the bankruptcy resolution plans of developers not able to deliver projects.
A three-judge bench headed by Justice Rohinton Fali Nariman disposed of a batch of over 180 petitions filed by several builders.
The property developers, including Supertech, ATS Realty and Today Homes, had argued that draconian provisions in the current laws are a "deadly weapon in the hands of homebuyers" and will crush the real estate sector.
The top court said that only genuine homebuyers can invoke insolvency proceedings against builders.
It also asked the central government to file an affidavit taking corrective measures within three months.
The Supreme Court said that homebuyers have the right to initiate proceedings before the RERA authority, the National Company Law Tribunal (NCLT) and the National Consumer Disputes Redressal Commission (NCDRC) as needed against builders.
Meanwhile, the top court last month cancelled the RERA registration of real estate group Amrapali for siphoning off homebuyers' money.
India's real estate sector is struggling with low consumer spending on the back of slow economic expansion and a credit crunch in the country's non-banking financial company sector, which has spooked the capital markets over the past few months and is stoking fears of a contagion effect.