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Homebuyers Claim Against Builders

Neha Garg
May 2, 2024

Are you a Homebuyer who has paid advances and development costs to the builder but  have not been given the possession of your home yet? Delays in real estate projects  can be frustrating and homebuyers can feel helpless against a powerful developer with  financial and legal means. Not anymore – with the Insolvency and Bankruptcy Code, homebuyers can initiate insolvency proceedings against the builders and enforce their  rights and make the builder pay up.  

Homebuyers Claim Against Builders

How were Homebuyers brought under the umbrella of “financial creditor” given in the IBC as a creditor? 

After the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), it was  observed that it did not contain an adequate recognition of the interests of home buyers  in real estate projects. Home buyers are vital stake holders and the process of corporate insolvency resolution, if initiated against the builder, directly impacts upon their rights  and interests. Yet the IBC, as initially crafted, did not contain provisions to protect them. 

As they were treated only as ‘other creditors’, not at par with financial and operational creditors, thus they were not able to initiate insolvency proceedings under IBC against  defaulting builder/developer. 

The concerns of the home buyers have been sought to be assuaged by the Insolvency and Bankruptcy (Amendment) Ordinance, 2018 which came into force on 6 June 2018. As a result of the Ordinance, home buyers are brought within the purview of financial  creditors under the IBC. An explanation to Section 5(8)(f) was inserted, which clarified  that  

“payments made by an allottee under a real estate project would be deemed to be an  amount having a commercial effect of borrowing” 

As a result, Homebuyers/allottees were expressly recognized as financial creditors  under the IBC, which enabled them to file homebuyer claims against builders through  initiating corporate insolvency resolution proceedings (CIRP) against a defaulting  developer. 

Homebuyers brought under the umbrella of financial creditor

Is there a minimum requirement for a homebuyer to file an application? 

Proviso to Section 7 of IBC allows homebuyer claims against builders only when 100  allottees or at least 10% of allottees whichever is less, jointly make an application. 

"Individual battles will not help, a collective effort is needed," says Dr Rajendra M  Ganatra, insolvency resolution professional.

Since the requirement stipulates a minimum threshold, it might feel daunting to gather  the courage to start the proceedings. However, with the help of technology this is getting  easier. You can now start a campaign against a developer as an individual with Ancoraa  Resolution (www.ancoraa.com) and other participants can add to the count as they join  alongside. Once the minimum threshold required under law is reached, an application is  initiated under Code by a licensed Insolvency professional. 

How can Homebuyers submit their claims 

Once an application is admitted under Section 7, the Adjudicating Authority (AA) has to  pass an order under Section 14 of the IBC, declaring moratorium and appointing an  interim resolution professional (IRP). The IRP is required to then make a public  announcement which is required to mention the last date for submission of claims by  creditors. In terms of Regulation 6 read with Regulation 12 of the IBBI (CIRP  Regulations) 2016, the creditors may submit their claims within 14 days from the date of  appointment of the IRP, failing which the claim may be submitted within a period of 90  days from the insolvency commencement date.  

In numerous judgments, NCLT (National Company Law Tribunal) has clarified that rejection of claim on the ground of delay beyond the 90 days period is not sustainable as the aforesaid provision is merely directory and not mandatory in nature. 

In addition, National Company Law Appellate Tribunal (NCLAT) on June 01, 2022 granted further relief to Homebuyers in relation to filing their claims. It was observed that  the public announcement inviting claims is normally done in the area where the corporate debtor has its registered office and corporate office, and there is every likelihood that all the Homebuyers who are usually hundreds in number neither come to  know about the CIRP nor do they file their claims within the stipulated period. In respect  to this, NCLAT held that even claims of those Homebuyers ought to be included in the  information memorandum who did not file their claims, if the same were reflected in the  record of the corporate debtor, as non-consideration of such claims would lead to inequitable and unfair resolution.

Homebuyers in relation to filing their claims

How Ancoraa can help Homebuyers 

About Ancoraa 

Ancoraa Resolution is a financial and debt resolution services firm promoted and  managed by experienced Insolvency Professional with deep experience in banking, debt resolution and restructuring. With over 35 associated insolvency professionals  located across 14 cities in India, Ancoraa Resolution ensures that you are equipped to  take speedy action in matters of insolvency, debt resolution, and liquidation. 

Ancoraa’s flagship technology, the Rezolution Engine® – is India’s first and only  ‘Resolution-as-a-Service’ platform providing a collaborative digital avenue to run the entire resolution process in compliance with the Insolvency & Bankruptcy Code and  Regulations. 

Ancoraa helps in filing homebuyer claims against builders by filing an application before the Adjudicating Authority in accordance with the provisions of the Code. Initiating your application on Ancoraa website is easy, fast and hassle free. One of our associate insolvency professionals will reach out to you and help you with your claims. The claims of each home buyer under different scenarios depends on the nature of the agreement and on the relief that the Homebuyer is seeking from the court. We further ensure that the Homebuyers claims are submitted within the specified time and Homebuyers have the valuable opportunity to participate in the Committee of Creditors, and therefore have the voting right in a class proportional to the financial debt through an authorized representative.

About the author
Neha Garg

Neha is the IP support executive at Ancoraa and a budding professional in the field of insolvency. She supports CIRP and PG engagements at Ancoraa and keeps track of NCLT proceedings throughout the admission process. She has a background in Law and CS.

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