Status as on- 20/07/2020
The struggle of homebuyers against the defaulting builder to get their homes, has seen multiple up and down over last 5 years. Where, on one-hand RERA Laws were implemented w.e.f. 01/05/2017 to protect the interest of homebuyers, on other hand, Insolvency and Bankruptcy Laws (IBC) laws were implemented in Dec, 2016 to provide resolution process of defaulting or sick companies.
Homebuyers under RERA
RERA Authorities under RERA Laws have passed multiple orders directing refund of money paid with interest or provide possession within stipulation time. However due to lack of stringent execution powers, the builders don’t take the RERA orders so seriously and keep defaulting. As per section 40 of RERA Act, the RERA authority can only issue the Recovery Certificate (RC) to respective DM under Land and Revenue Act, however, it is very hard and impractical to recover money from defaulting builders.
Homebuyers under IBC
Insolvency and Bankruptcy Code, 2016 was enacted with the object to find the resolution plan at the early stage of defaulting company and revive the sinking company. These codes have overriding effect. Once, any company admitted for resolution process, other legal case or recovery cases get suspended. Homebuyers were given right to file petitions against the defaulting builder however, on 28/12/2019, Central Government made amendment where by certain conditions were levied on the homebuyers to file case before NCLT under IBC laws which are as under:
In case of homebuyer, any petition by homebuyer can jointly be filed if no. of buyer are either
- 10% of the allottees in the real estate project or
- 100 homebuyers of that project
Whichever is lesser?
However, it is very difficult task to get so many buyers together, Hence filing of any petition by homebuyer is very rare.
Person with RERA refund order is not Homebuyer
As per our research, if any person gets the RERA refund order and the builder is unable to pay the amount in the prescribed time-limit, then it become as default. Since an Authority has passed RERA refund order which means the Builder –Buyer agreement has been terminated and refund of paid amount has been awarded, then you are normal financial creditor having court order and the builder has not appeal against the order.
The above proposition has been upload by NCLT Delhi Bench in the case of Mr. Ashok Tripathi vs. M/s Ansal Properities and Infrastructure Ltd in March, 2020 where it was held that the person having the court decree is not the homebuyer anymore but shall be a decree holder.
Based on the above legal pronouncement, it is clear that after getting the refund order from RERA or consumer court, if builder make default in it that the IBC petition can be filed before NCLT under IBC Laws subject to fulfilling other legal requirements.
You may think that will it benefit you in getting the money back? The answer is before NCLT the developer/Builder has much higher stake to lose. In case he cannot prove his solvency then he has to give up his company. For the defaulting companies, the early resolution can be found out and assets can be protected.
Disclaimer- The above article is based on the personal interpretation of the related laws and judicial pronouncement. The readers are expected to take expert advice before placing reliance on this article. The author can be reached at firstname.lastname@example.org