Insolvency and Bankruptcy Code Amended in Favor of Homebuyers.
Lakhs and lakhs of homebuyers and allottees of flats have been facing extreme anxiety for the past few years. The main reason being that the flats or apartments that were booked by them were either unusually delayed or not delivered by the real estate developers.
In a recent landmark judgment the Supreme Court upheld the amendment of Insolvency and Bankruptcy Code (IBC) and granted the homebuyers financial creditor status.
This amendment of IBC was introduced in August, 2018, under Section 5 (8) (f) of the IBC but was challenged by more than 180 real estate companies in the top court.
The Apex Court upheld the constitutional validity of the amendments of Section and also stressed that it does not infringe in any way upon the rights of real estate developers and cannot be labeled as “arbitrary” or “discriminatory”.
It further clarified that the homebuyers gave huge amounts of money as advance payments to the builders towards the purchase of flats and hence, should be treated as financial creditors.
This amendment has empowered the homebuyers who were being duped by fraudulent companies that swindled the funds, cheated them and never delivered. Now the homebuyers can trigger the Code under Section 7 of IBC, 2016 and have their rightful place on the Committee of Creditors (CoC) and have a voice in making important decisions as to the future of the real estate company.
Insolvency and Bankruptcy code, 2016, is a consolidated enactment of various codes which provides a single window clearance system of all earliest enactment. The objective of the Insolvency and Bankruptcy Code is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, firms.
An insolvency resolution process (IRP) can be initiated by either a financial creditor or by operational creditor or the corporate applicant (corporate debtor) upon an event of default. A revival plan is resolved within 180 days from the admission of the application. Making this process time bound is very essential as the value of the assets can erode substantially with the passage of time.
In the event of disagreement or if a decision is not taken within the stipulated time-frame, the applicant automatically moves to the next stage of Insolvency Process.
If you are aggrieved homebuyer we will assist you in initiation of Corporate Insolvency Resolution Process as a Financial Creditor under Section 7 of IBC and help you recover your dues.
In case of Initiation of Corporate Insolvency Resolution Process by Financial Creditor, the Financial Creditor should owe the financial debt and the debt should be legally assigned to him and transferred. The minimum amount owed by the Corporate Creditor should be Rs one lakh.
The Term “Financial Creditor” includes Banks, Financial Institutions, Homebuyers, Enterprise, Corporate Entity or Company (Section 7 of the IBC).
According to Sub-section (1) of the Act, the Financial Creditor either by itself or jointly with other financial creditors may file an application for Initiating the Corporate Insolvency Resolution Process against a corporate debtor when a default has occurred. The Adjudicating Authority shall within 14 days of the receipt of the application under sub-section (2), ascertain the existence of the default from the records of the information utility or on the basis of the evidence furnished by the financial creditor under sub-section (3).
Also, where the Adjudicating authority is satisfied that-
Yes, you can initiate IRP against the builder by producing related documents as evidence
The fee amount for a financial creditor has been fixed at Rs 25,000.
The time limit prescribed the Code is three years from the date on which the debt becomes due or payable to the financial creditors.
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