8/9/2019 Homebuyers as Financial Creditors under IBC: SC upholds amendment

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IBC: Supreme Court upholds amendment to the Code

regarding status of homebuyers as Financial Creditors
Shruti Mahajan August 9 2019

327

In a boost to the homebuyers, the Supreme Court today upheld the amendment made to the
insolvency and bankruptcy code (IBC) with respect to the classi䙕cation of homebuyers as Financial
Creditors.

The Court said that the original provisions concerning Financial Creditors under the Code always
subsumed homebuyers and that the amendment under challenge had only added an explanation to
the Section making this inclusion further clear.

The IBC gives an additional forum to the homebuyers to raise their grievance and the provisions under
the Code and RERA can work "harmoniously", the Court said. It further added that the pleas of
genuinely aggrieved homebuyers would be entertained by the National Company Law Tribunal (NCLT).

In addition to this, the Court has directed the Centre to 䙕ll up the vacancies in the NCLT and the NCLAT,
in light of the increasing number of pleas 䙕les by aggrieved homebuyers, and to apprise the Court of
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8/9/2019 Homebuyers as Financial Creditors under IBC: SC upholds amendment

the steps taken to this end.

The judgment was rendered by a Bench headed by Justice Rohinton Nariman in a batch of over 140
petitions 䙕led by real estate companies. These petitions challenged the amendment brought to the IBC
by the Central government with respect to homebuyers. The Constitutional validity of Section 5(8)(f) of
the IBC, which included homebuyers under the umbrella of 䙕nancial creditors, was under challenge
here.

The Centre had defended the amendment in the Court saying that the inclusion of homebuyers in the
category of 䙕nancial creditors was done to protect the rights of such homebuyers who invest their
money and get duped by developers and real estate companies.

In its submissions before the Court, the Centre also said that the homebuyers were already covered
under the de䙕nition of 䙕nancial creditors and that the amendment made to the concerned Section of
the IBC was done to insert an explanation for the purpose of "abundant clarity" on this inclusion.

The developers and real estate companies had argued that fora such as Consumer Courts and
concerned authority under Real Estate (Regulation and Development) Act (RERA) are already available to
homebuyers to raise their grievance. Thus, their grievances need not be made part of proceedings
under IBC, it was contended. The Centre, however, countered this, submitting that the amendment is
aimed at and would a�ect only defaulting real estate companies.

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8/9/2019 Homebuyers as Financial Creditors under IBC: SC upholds amendment

Homebuyers also took a stance similar to that of the Centre, to say that they are the highest
stakeholders in a housing project. In this context, it was argued that the amendment would ensure that
their rights are protected. Further, it was also argued that the amendment would ensure that they are
represented in proceedings, should a company default and be required to go under the IBC and a
resolution drawn up.

JSA represented Emaar India Partners. Shivpriya Nanda, Daksh Ahluwalia and Senior Associate Adhiraj
Gupta advised on the corporate side and Partners Amar Gupta, Divyam Aggarwal and Associate Pallavi
Kumar were on the disputes side of the matter.

[Read the Judgment]

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8/9/2019 Homebuyers as Financial Creditors under IBC: SC upholds amendment

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8/9/2019 Homebuyers as Financial Creditors under IBC: SC upholds amendment

3 Comments Sort by  Top

Add a comment...

Aurobindo Banerjee
This is a very important lifeline provided to the homebuyers vis­a­vis the too powerful builders' lobby.
Like · Reply · 3h

Prasad Babu
A very important timely judgement for the protection of homebuyers to address the grievance before the
National Company Law Tribunal after the amendments made in the Insolvency and Bankruptcy Code. Thus
the judgement gives more teeth to attach the properties of builders and put them behind the bars.The errant
defaulters should not be given any time to escape from punishment and such cases should not be adjourned.
Like · Reply · 2h

Shekarappa B Shekar B
Ho'ble Supreme Court Judges are equal to God to punish unscrupuolous businessman particularly real estate
businessman/ companies. In India 90% real estate companies have been cheating home buyers or office
space buyers. 

Thanks to Hon'ble Judges.
Like · Reply · 1h

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