Can homebuyer approach NCLT before RERA?


Real Estate (Regulation and Development) Act, 2016 was introduced to address the structured issues with respect to real estate sector in particular. By far this sector was very much unregulated. After implementation RERA, Regulatory Authorities were setup across the country and are working to the best of their efforts in order to regulate the real estate market. Be it the buyer or the developer the authorities are looking into all the aspects while passing an order. In case of developer the authorities have sent proper notices to the developers to register themselves and to register their projects with the respective RERA Authorities. Some authorities have taken stern action if any party fails to abide their orders and notices.

Wherein, in the year, 2018 the homebuyers were given a status of financial creditor under the Insolvency and bankruptcy Code, 2016. Now the question arises when can one file case under IBC. There are two essentials to file case under IBC, one there must be a financial debt on the part of the debtor/company, secondly a default must co-exist.

Pursuant to the above homebuyer have started to approach the NCLT wherein the builder have failed to pay the dues as per the terms of the agreement or orders passed by the RERA Authorities.

RERA and NCLT are two different bodies dealing with different sector one deals with regulation of real estate sector and other deals with company laws, insolvency proceeding. The aggrieved homebuyer approaches the RERA Authority for delay in handing over possession according to the circumstances of every case the respective RERA Authorities pass an order for refund alongwith interest or possession with interest. The problem arises after an order has been passed by the authority, as the builders are failing to execute the order neither are they providing refund or handing over the possession or delayed charges for that matter. Now the only recourse the buyer has is to file execution application with the authorities, but execution is a cumbersome process.

So once a RERA order is passed the debt accrues thereafter not making payment creates a default. Therefore the homebuyer are approaching NLCT since there is a debt and recurring default with it as builder has failed to make payments in time bound manner. Hence as per the provisions under IBC laws one can file a case before NCLT. Pursuant to the above it is can be said that it will not amount to forum shopping but there must be only one path for particular dispute and not parallel paths which only will provide conflicting results leading to confusions.

On the contradictory chairpersons’ of the various RERA authorities are of the opinion that NCLT must take suggestions from the concerned real estate regulator before addressing the issue of the real estate project which are registered with RERA. Further it can be said RERA is well equipped but still needs improvement.

Lastly, RERA has been specifically setup to regulate the real estate sector therefore one must approach RERA before approaching NCLT.

Disclaimer – Please note that the above articles is based on the interpretation of related laws and judicial pronouncement which may differ from person to person. The reader are expected to take the expert opinion on the matter.

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