Homebuyer Files Plea In Supreme Court Challenging Amendments In IBC
New Delhi: A homebuyer has filed plea in the Supreme Court challenging the recent amendments made to the Insolvency & Bankruptcy Code (IBC) 2016 which requires at least 100 customers of a real estate project or 10 percent of the total number of allottees, whichever is less, to approach the NCLT to start insolvency proceedings against the builder.
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, brought in by the government towards the end of 2019, has made changes in the provisions of the Section 7 of the Insolvency and Bankruptcy Code (IBC) and put in the threshold of a minimum set of buyers to approach the NCLT.
The plea has been filed by Manish Kumar, a home buyer himself. He has filed a case against a builder in the NCLT and in his petition to the apex court he has said that his case in the NCLT will have to be withdrawn if he fails to meet the new conditions as now required by the Ordinance.
According to his plea in the apex court, ‘Financial Creditors’ are already recognised as a ‘Class’ under the category of ‘Creditors’ under the IBC and the Ordinance goes on the further classify the class of financial creditors and imposes conditions on the newly created class. This condition will prevent the homebuyers from availing the benefits that are available to others under the IBC.
The Ordinance is thus creating a class within a class which is “unconstitutional”, according to the petition.
The plea further states that the Ordinance has been brought in by the government in such a hurried manner that there seems to be a move to over-turn a law already laid down by the Supreme Court.
The Ordinance has been brought in with retrospective effect. This petitioner has argues that this will negatively impact the homebuyers. They have paid Rs 25,000 has court fee in NCLT for filing the cases against builders and this Ordinance will put them in a disadvantaged position, the petition said.
It may be re-called that the IBC was formulated in 2016 had the home buyers were recognised as ‘Financial Creditors’ in 2018 under the IBC, allowing them to approach the NCLT against builders in case they were not hander over their properties in stipulated time periods.
Following this change in the IBC, there have been 1,821 cases filed by buyers against builders across the country. In many cases, the NLCT has order initiation of insolvency proceedings against many of the developers.
Up until the Ordinance was brought in by the government in December 2019, the developers were demanding change in the IBC so as to make a certain number of minimum homebuyers to come together to be able to file insolvency cases against them.
Ever since the Ordinance came out, the home buyers have been crying foul and have been asking for a roll-back of the changes.