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The Court said that the original provisions concerning Financial Creditors under the Code always subsumed homebuyers and that the amendment under challenge had only added an explanation to the Section making this inclusion further clear.
The IBC gives an additional forum to the homebuyers to raise their grievance and the provisions under the Code and RERA can work “harmoniously”, the Court said. It further added that the pleas of genuinely aggrieved homebuyers would be entertained by the National Company Law Tribunal (NCLT).
In addition to this, the Court has directed the Centre to fill up the vacancies in the NCLT and the NCLAT, in light of the increasing number of pleas files by aggrieved homebuyers, and to apprise the Court of the steps taken to this end.
The judgment was rendered by a Bench headed by Justice Rohinton Nariman in a batch of over 140 petitions filed by real estate companies. These petitions challenged the amendment brought to the IBC by the Central government with respect to homebuyers. The Constitutional validity of Section 5(8)(f) of the IBC, which included homebuyers under the umbrella of financial creditors, was under challenge here.
The Centre had defended the amendment in the Court saying that the inclusion of homebuyers in the category of financial creditors was done to protect the rights of such homebuyers who invest their money and get duped by developers and real estate companies.
In its submissions before the Court, the Centre also said that the homebuyers were already covered under the definition of financial creditors and that the amendment made to the concerned Section of the IBC was done to insert an explanation for the purpose of “abundant clarity” on this inclusion.
The developers and real estate companies had argued that fora such as Consumer Courts and concerned authority under Real Estate (Regulation and Development) Act (RERA) are already available to homebuyers to raise their grievance. Thus, their grievances need not be made part of proceedings under IBC, it was contended. The Centre, however, countered this, submitting that the amendment is aimed at and would affect only defaulting real estate companies.
Homebuyers also took a stance similar to that of the Centre, to say that they are the highest stakeholders in a housing project. In this context, it was argued that the amendment would ensure that their rights are protected. Further, it was also argued that the amendment would ensure that they are represented in proceedings, should a company default and be required to go under the IBC and a resolution drawn up.
The builders were represented by Senior Advocates Abhishek Manu Singhvi, Shyam Divan, Jayant Bhushan, Arvind Datar, Neeraj Kishan Kaul and Krishnan Venugopal.
In the lead matter filed by Pioneer Urban Land and Infrastructure Ltd, the homebuyers were represented by advocates Aditya Parolia and Piyush Singh of PSP Legal.
JSA represented Emaar India Partners. Shivpriya Nanda, Daksh Ahluwalia and Senior Associate Adhiraj Gupta advised on the corporate side and Partners Amar Gupta, Divyam Aggarwal and Associate Pallavi Kumar were on the disputes side of the matter.
[Read the Judgment]