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.
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.
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.
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, National Company Law Tribunal (NCLT) 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.
Ancoraa Resolution is a financial services firm promoted and managed by experienced Insolvency Professions with a deep experience in banking, debt resolution and restructuring. Ancoraa Resolution helps suppliers file the insolvency applications and get their dues faster by leveraging its technology platform and speeding up the recovery process. With over 35 licensed 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 of India. Whether you are a supplier, a homebuyer, a bank or a personal Guarantor, Rezolution Engine® enables anyone to initiate an insolvency application and allows all the participants to get a single point of view to the insolvency and bankruptcy proceedings, while maintaining compliance and governance throughout the process.
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 licensed 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.