Status as on- 06/01/2020
On 28.12.2019, Central Govt. passed an ordinance by which they brought a cap on no. of allottees/homebuyers approaching the NCLT u/s 7 of the IBC Code, 2016. The said ordinance states that now to approach the NCLT there has to be at least 10% of the allottees of the project or 100 homebuyers whichever is less. Let us analyze the ordinance in-depth in order to understand its true impact on the rights of homebuyers.
WHAT EXACTLY IS THE ORDINANCE?
On 12/12/2019, the Govt. with full vigor brought in the IBC Amendment Bill, 2019 which above and beyond few other amendments also talked about bringing a cap on the no. of homebuyers approaching the NCLT u/s 7 of IBC. However, the said bill after being presented in the Lok Sabha was recommended to the Standing committee of Parliament. This gave a ray of hope to thousands of homebuyers the said bill maybe this will not be brought in any time soon.
But to the dismay of thousands of buyers, the Govt. owing to the fact that parliament session is not in place, brought in the said threshold through the means of an ordinance dated 28.12.2019.
The new formula of prescribing threshold one of its kind which is not only against the homebuyers but also impractical and discriminating.
Now, let us understand why this ordinance is impractical?
- The Govt. has failed to prescribe as to how it will actually be implemented where total no of allottees are not aware of?
- How will a single allottee get the information and contact other allottees in a real estate project?
- How to fulfill the requirement where any tower or portion of a big project is pending to be constructed?
- Since it is applicable to cases that are pending before NCLT which shall be deemed withdrawn if the new requirement is not fulfilled, hence who would bear the burden of fees paid to NCLT or advocates?
JOURNEY OF HOMEBUYER AS FINANCIAL CREDITOR BEFORE NCLT TILL DATE
- Initially the IBC Code, 2016 did not recognize the Homebuyers as financial creditors.
- After Hon’ble Supreme Court observation in “Chitra Sharma Vs. Union of India Ministry” the Govt. made amendment in the code making homebuyer as financial creditor and giving them unfettered right to approach the NCLT u/s 7 of IBC.
- Post that, all the builders approached the Apex Court challenging the rights of homebuyers in the case of “Pioneer Urban Land and Infrastructure Limited & Ors. vs. Union of India”. wherein the Hon’ble Supreme Court vide its judgment dated 9th August 2019 upheld the said rights of homebuyers.
- Now recent the amendment brought by the Govt. wherein the threshold of minimum 100 buyers or 10% of the allottees have been brought which in principle defeats the above-stated judgment of the Supreme Court in spirit and principle.
HOW WILL IT IMPACT?
In order to understand the ordinance in full detail, let us categorize the allottees and how the ordinance shall impact them all.
1.1 HOMEBUYERS WITHOUT ANY COURT ORDER
That the major impact of this ordinance is on this class of homebuyers. Till now for any extra-ordinary delay in possession, approaching NCLT u/s 7 of the IBC was the quick and time-bound resolution of the respective projects. Now, since the enactment of the recent ordinance is applicable to on-going such petition, the homebuyers who are already in before the NCLT is supposed to file an amendment in their application within a period of 30 days fulfilling the new threshold otherwise such cases shall be deemed as withdrawn.
1.2 HOMEBUYERS WITH RERA/OTHER COURT ORDERS, FOR POSSESSION
As per best of understanding, this class of buyers would be having 2 kinds of
parts (i) homebuyers for the principal amount (ii) financial debt covered u/s 5(8) of IBC, for the interest which has been ordered by such order. For the default of (ii) part, such buyers can approach NCLT under IBC. However, for (i) part, the new threshold of homebuyers shall be applicable to the approach to NCLT.
1.3 HOMEBUYERS WITH A REFUND ORDER OR RECOVERY CERTIFICATE (RC) FROM RERA OR OTHER COURTS
These are not exactly homebuyer. When any refund is ordered to be given, means the contract of the builder buyer has been terminated.
This section of buyers is well within their rights to approach the NCLT under the IBC Code, 2016 as decree-holder and such debt is covered under the 1st part of definition u/s 5 (8) of IBC. Therefore, you can approach the NCLT as decree-holder for financial debt which has accrued through that decree or RC.
THE ROAD FURTHER
That as clearly stated above, the status of all the homebuyers are different, people with RERA or court orders can directly file petition u/s 7 of IBC before NCLT. However, other buyers, instead of sleeping on their rights, should approach the concerned RERA Authorities at the earliest and get an order which can further be put before the NCLT for non-execution as decree-holder.
Furthermore, some of the homebuyers have filed a writ in Hon’ble Supreme court through Centrik which is likely to be listed this week. We would keep updating. For more information, please connect to our counsel at 84-4848-7143
Disclaimer – the above article is based on interpretation of the related judicial pronouncement and related laws which may differ person to person. The readers are expected to take expert opinion before placing reliance on it. For more information, please reach us at email@example.com