In a major win for homebuyers, the Supreme Court on August 9 upheld the amendment in the Insolvency and Bankruptcy Code that confers them the status of financial creditors.

Dismissing the plea of over 200 real estate companies that had pleaded that the IBC amendment was illegal and unconstitutional, a bench headed by Justice RF Nariman said the amendment provided homebuyers with an additional platform on which they could raise their grievances against real estate developers.

The bench said that the RERA act, which regulates the real estate sector, should be read in harmony with the IBC amendments. RERA is not in derogation of any act, and in case of conflict between RERA and IBC, IBC prevails, the court made it clear.

The consumers have the option of seeking remedy under any provision — the Consumer Protection Act, IBC or RERA, it said.

The bench said only genuine homebuyers can invoke insolvency proceedings against a builder, and asked the Centre to file an affidavit taking corrective measures.

"It's a landmark judgment as the amendment has been upheld," said Ashwarya Sinha, advocate who had represented some of the homebuyers in the case. "Additionally, it will settle a lot of teething issues faced by forums, including NCLT/consumer forums/RERA, across the country. Further, as per the judgment some additional defences unique to IBC have also been added."

SC also directed the Centre to fill up vacancies in the National Company Law Tribunal and Appellate Tribunal to handle the rising number of cases filed against companies under IBC.

The Court was hearing a batch of petitions filed by over 200 real estate companies challenging the constitutional validity of the IBC amendment that gives homebuyers the status of financial creditor in the insolvency proceedings.

The real estate companies challenged the validity of Section 5(8)(f) of the IBC which ensures inclusion of homebuyers as financial creditors and said the provision was draconian and unconstitutional. The builders had argued that homebuyers had remedies under the RERA, and the amendments to IBC amounts to duplication.

"The constitutional bench of the Supreme Court upholding the constitutional validity of the amendment in IBC to include homebuyers in the list of financial creditors is certainly a huge sigh of relief for aggrieved homebuyers," said advocate Aditya Parolia, PSP Legal, who represented homebuyers in the lead matter, Pioneer Urban Land and Infrastructure.

The landmark judgment will prove to be a  huge deterrent against fraudulent/unscrupulous builders, he added.

Earlier, the Centre had filed an affidavit in the apex court and said the law was amended to protect the interest of lakhs of homebuyers who had invested their hard earned money to purchase flats, but were cheated by the companies.

Pioneer Urban Land and Infrastructure had filed a plea in the Supreme Court in January 2019 challenging the constitutional validity of section 5 (8) (f) of the IBC 2016 under which homebuyers were conferred the right of financial creditors.

A host of similar writs were by filed by developers such as BPTP, Supertech, Today Homes Noida, Ireo, CHD Developers, ATS among others. #casansaar (Source - PTI, MoneyControl)