The National Company Law Appellate Tribunal (NCLAT) has ruled that home-buyers cannot drag realty companies through the insolvency process for recovering monies awarded to them by a real estate regulator.
The NCLAT ruled that a home-buyer cannot be treated as a financial creditor when the real estate company is unable to honour a decree awarded by the State-level Real Estate Regulatory Authority (RERA). Home-buyers need to take recourse to the civil law to recover the money.
Prashant Thakur, Director & Head – Research, ANAROCK Property Consultants, said the NCLAT’s observation is in line with the 2019 amendment that only a minimum of 100 buyers or 10 per cent of all home-buyers in a project (whichever is lower) can file for bankruptcy.
“While the pros and cons of its impact on home-buyers and developers are debatable, the caveat of a minimum 100 home-buyers may prevent developers from being unfairly dragged into insolvency by just one or two individuals. In some cases, vested interests may lead to work getting stopped in a project, thus affecting other home-buyers negatively. In some cases, there has also been misuse by some home-buyers of the sanctioned rights,” Thakur told BusinessLine .
On the flipside, it may affect genuine home-buyers in projects where the builder is delaying work. These home-buyers will have to form a group to file a case against the builder. This process may be long drawn and tedious.
The NCLAT gave the ruling in a case related to Ansal Properties wherein two house allottees were given a decree for ₹73 lakh by the Uttar Pradesh RERA. The home-buyers then took recourse to the IBC rules to recover the money. In March, the National Company Law Tribunal upheld the home-buyers’ stand and even appointed a resolution professional for Ansal Properties. Now, with the NCLAT’s ruling, the company will be handed back to its earlier management.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.