Introduction
One of the major financial commitments is buying your own home. Unfortunately, in todays’ time, many homebuyers are facing situations where the Builders are unable to complete their Projects on time due to any reason whatsoever, and ends up into insolvency, leaving the homebuyers anxious about losing their investments. If you are also amongst such homebuyers, who are distressed by such a situation and are searching for the right path to get a resolution, you are at the right place.
What do you mean by Builder Insolvency?
When a builder defaults in repayment of its debts to its lenders, investors or fails to adhere by its contractual obligations with the homebuyers, insolvency proceedings can be initiated under the Insolvency and Bankruptcy Code, 2016 (IBC), before the National Company Law Tribunal (NCLT). Once admitted by the NCLT, the Builder is said to be “insolvent”. Once, insolvent –
– The management of the builder is suspended.
– A court officer, known as the Insolvency Resolution Professional (IRP) is appointed and takes control over the management of the builder.
– “Moratorium” imposes, halting the pending cases and recovery actions.
– All possible attempts are made for the revival of the builder company.
What Homebuyers can do?
Under the IBC, homebuyers are recognized as “financial creditors”, as a financial debt is owed to them by the builder. IBC gives homebuyers as financial creditors, their rights and duties, strengthening the position of homebuyers during the whole process. These rights include, but not limits to –
– Right to file their claim before the IRP
– Right to representation through an Authorised Representative (AR) during the process
– Right to vote in the meeting of Committee of Creditors (CoC)
– Right to have a say in approval or rejection of Resolution Plan for their Project
What should Homebuyers do?
Step I: – Check whether the NCLT has admitted the insolvency against the builder and whether an IRP has been appointed. Once an IRP is appointed, a public announcement is issued, calling upon all the creditors to file their claim before the IRP.
Step II: – Gather all the requisite documents such as builder buyer agreement executed between you and the builder, allotment letter issued by the builder, proofs of payments made to the builder and communication trails with builder.
Step III: – Consult an expert, generally an Advocate, who will help you prepare your claim in the prescribed format, annexing therewith, all the relevant documents substantiating your claim and filing it before the IRP. Remember, delays or errors can weaken your legal position.
Step IV: – Keep a track on the happenings in the insolvency process and stay engaged and updated with the insolvency proceedings.
What happens to the Project?
Several outcomes may be possible, depending upon the Resolution Plan approved by the NCLT. Outcome may be that the completion of the Project be taken over by a new, facilitation of completion of Project by lenders or external authorities, refunds or, in the worst case, the builder-company may be liquidated. This is where legal consultation can be vital.
How we can help?
A legal firm can assist you in filing and pursuing your claim, be your voice before NCLT and other tribunals and authorities, and advice you with the best way out. Our firm regularly advices and represents homebuyers in various builder related matters, to protect their maximum interests. We together can work towards the best practical solution!
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