In August this year, the Supreme Court amended the IBC allowing a single homebuyer (who is now a financial creditor) to trigger insolvency proceedings against a developer.
The national lobbying arm of homebuyers, Forum for People’s Collective Efforts (FPCE) has approached Prime Minister Narendra Modi urging him not to constrict the rights of homebuyers to initiate insolvency proceedings against real estate developers.
The plea is in the wake of reports that the government is considering changes in the insolvency code to stipulate that the number of homebuyers required to file an insolvency case must be at least 100 or they must collectively account for a minimum of 5% of the outstanding debt of the realty developer, whichever is lower.
Currently, even a single homebuyer can take a realty firm to NCLT under the Code.
“Having failed legally, the builders are now mounting pressure on your government to amend IBC to suit their interest by either completely barring homebuyers from approaching NCLT or insert the requirement of a minimum threshold of number of homebuyers, who need to come together for approaching NCLT. This suggestion by builders is not only illogical, but also regressive to say the least,” FPCE president Abhay Upadhyay wrote to the PM.
Upadhyay, who is also a member of central advisory council of RERA under the ministry of housing and urban affairs (MoHUA), told FE that such a move would be against the struggle and sacrifices made by homebuyers across India to get their rightful share.
He contended, “Under IBC, a single creditor (operational or financial) whose dues is Rs 1 lakh or more can drag a corporate entity to the National Company Law Tribunal (NCLT), then how can a single homebuyer be barred whose financial stake will be many times more than this amount?”.
In August this year, the Supreme Court amended the IBC allowing a single homebuyer (who is now a financial creditor) to trigger insolvency proceedings against a developer. The apex court said that since homebuyers give advances to builders and finance the project, they are really ‘financial creditors’.
FPCE in its November 18 letter to the prime minister emphasised that “Under Insolvency and Bankruptcy Code (IBC), the promoter (being developer in this case) can file for insolvency proceedings before the NCLT against himself, whereas they want to deny that same right to their customers (who will be homebuyers in this case), which will create an irreparable anomaly in the law and will be against the principle of natural justice”.
“It is absurd to demand that an accused should not be dragged to a court of law till 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 join hands,” it added.
“Under these circumstances, 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,” FPCE urged Modi.
FPCE is a not-for-profit company formed by the core committee members of Fight For RERA (FFR) under section 8 of Companies Act, primarily to work towards protection of citizen’s right.
FFR was a movement initiated for taking collective steps by involving homebuyers from all across India, with the objective to compel the central government to enact the RERA act on top priority.