The Supreme Court has upheld the amendments made to the Insolvency and Bankruptcy Code(IBC) that classified homebuyers as financial creditors.
The verdict came on a petition filed by builders who had challenged the IBC amendment citing that it would result in duplication as the homebuyers have already been given protection under Real Estate Regulation and Development Act(RERA).
However,the court said that homebuyers will have the option to avail legal remedies before consumer court, real estate regulatory authorities, as well as bankruptcy courts.In case of conflicts with other laws, provisions of Insolvency and Bankruptcy Code will prevail.
The code has also brought the home buyers on par with the creditor banks of the property builder.
Prior to the law,the assets of the bankrupt builder were divided among his employees,creditor banks and other operational creditors.Home buyers had hardly figured though they may have provided a major chunk of the housing project.
The Code also allowed home buyers as financial creditors to trigger bankruptcy proceedings under the Insolvency and Bankruptcy Code of 2016 and have their rightful place on the Committee of Creditors (CoC).
The CoC makes important decisions by voting on the future of the bankrupt builder.These calls include what to do with his assets and who should finish the pending housing projects.