Homebuyers have opposed a move by real estate developers to get the Insolvency and Bankruptcy Code (IBC) amended, saying the move is not only “illogical and illegal but also regressive” and would send a wrong message and derail the government’s efforts to reform the sector.
“Having failed legally, these builders are now mounting pressure on your government to amend IBC to suit their interest by either completely barring homebuyers from approaching the National Company Law Tribunal (NCLT) or inserting the requirement of a minimum threshold of a number of homebuyers who need to come together for approaching NCLT. This suggestion of builders is not only illogical, illegal but also regressive to say the least,” Forum for Peoples Collective Efforts has said in a letter to the Prime Minister Narendra Modi.
“We would like to apprise your government that any amendment to dilute the rights of homebuyers under IBC will send a wrong message and derail the whole process of reforming the real estate sector,” they said in the letter.
They hoped the government would continue with its efforts to strengthen and empower the homebuyers who have “immensely suffered at the hands of real estate developers since decades by ensuring that no amendment is undertaken which dilutes IBC in favour of developers and/or weakens the right of homebuyers.”
They pointed out the Supreme Court had already clarified that RERA and IBC will co-exist and that “any demand to amend the law should not be entertained as it is against the judgment of the Apex court.”
“An accused developer cannot be allowed to decide in which court they should be dragged by his victim just to suit his comfort. He also cannot be allowed to dictate dilution in law so that he can breathe easy and it becomes difficult for his victim to make good his loss.
"There is no such precedence anywhere in the world where lawmakers amend the legislation by listening to stakeholders who are accused under that law. Rather it should be vice-versa where legislations should amend the law to ensure speedy and fair justice by listening to the victims who have suffered,” the letter read.
Under IBC, a single creditor (operational/financial) whose due is Rs 1 lakh or more can drag a corporate entity to the NCLT, then how can a single homebuyer be barred whose financial stake will be many times more than this amount, the letter noted.
“Under IBC, the promoter (being developer in this case) can file for Insolvency proceedings before NCLT against himself, whereas they want to deny that same right to their customers (who will be homebuyers in this case) which will create irreparable anomaly in the law and will be against the principle of natural justice.
It is absurd to demand that the accused should not be dragged to a court of law until his victim finds other victims and joins hands to become eligible to approach a court of law. It is akin to saying that no one should approach a police station against a person who is guilty of murder till he finds other victims of murder by the accused and joins hands,” the letter said.
The letter also mentions that real estate is not the only sector with a regulator. There are other regulators like RBI, IRDAI, TRAI, SEBI and the corporate entities who come under these regulators have not made any such demand.
“The real estate developers are making every attempt to thwart all steps taken by your government to empower homebuyers and bring reforms in the sector. They also challenged the constitutional validity of RERA but failed. It is very clear that they have yet not understood that there is a change in regime and now they need to change their ways rather than expect amendments in-laws to protect them from strong action and thereby deny justice to home-buyers,” the letter said.
"It is difficult to understand why builders are scared of NCLT when they know that it is as much legal for homebuyers to approach NCLT as RERA and they will get ample opportunity there to prove their innocence. It is also well known that when real estate projects are delayed or something promised is missing then it is for all homebuyers of that project, though it may be that only single homebuyer who takes a lead, to approach the court of law. It is not important whether single or multiple homebuyers approach NCLT," Abhay Upadhyay, president, Forum for Peoples Collective Efforts, told Moneycontrol.
Recently, CREDAI proposed to the Corporate Affairs Ministry that the minimum threshold for homebuyers, who should be able to initiate insolvency proceedings against realtors, should be at least two-third of homebuyers (in a project).
Homebuyers have filed more than 1,800 cases against builders under the Insolvency and Bankruptcy Code (IBC) since June 2018, the government told the Lok Sabha on November 18. These are the number of cases pending before the National Company Law Tribunal (NCLT) as on September 30.
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