It is not a “cakewalk” and may not be easy for homebuyers to recover their money from defaulting real estate players, even after becoming financial creditors under the Insolvency & Bankruptcy Code, according to NCLT President Justice M M Kumar.
Unless the Supreme Court comes to their rescue, there are many risks for homebuyers under the IBC, said Justice Kumar, while speaking at a seminar on “Restructuring of Stressed Assets – Current Scenario” by industry chamber PHDCCI here.
“Homebuyers, after becoming financial creditors, under the IBC (after amendments) may no be a happy lot,” Justice Kumar said.
He further said if the Supreme Court exercises its power under Article 142 of Indian Constitution, “that may come to their rescue, otherwise there are many risks, legally speaking”.
“It may not be that easy for the home buyers. It is not a cakewalk,” he added.
Explaining why homebuyers still faced uncertainties in recovering their money under the amended IBC, Justice Kumar said there is a question mark on how they would be treated vis-a-vis secured creditors.
“The home buyers, their fate even after they have become financial creditors, would still be suffixed in front of the secured creditors,” he said.
As there are different types of financial creditors, how homebuyers would be categorised or if they must be treated as secured creditors is a debatable issue, Justice Kumar added.
Moreover, he said there is also a question mark over the ownership of the property, for which the buyers had made payment.
“Whether the payment given by them (homebuyers) would be considered as legal owned property or others’ property?” he said.
On being asked that in case, if there is no tripartite agreement (between bank, buyer and builder), sales of future assets, which are being mortgaged and not come into existence, would that be a secured asset, Justice Kumar said that is a grey area.
“As I have said that this a grey area. The home buyers may not have a reason to celebrate as yet. I am frankly telling you. We do not know what type of… they would come before us and how we will decide,” he said.
On May 24, the government amended the IBC allowing home buyers to be financial creditors of the company through an ordinance and yesterday Union Finance Minister Piyush Goyal introduced The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018 to replace it.
JaypeeInfratech, which is a subsidiary of Jaypee group’s flagship firm Jaiprakash Associatesis developing about 32,000 flats, of which it has delivered 9,500 apartments.
Debt-ridden Jaypee Infratech has an outstanding debt of nearly Rs 9,800 crore, of which Rs 4,334 crore pertains to IDBI. NCLT has already admitted insolvency plea against it.
Besides, home buyers from Amrapali group are also facing similar situation after NCLT admitted insolvency plea against the company.
Source: July 24, 2018, Economic Times