Over the last decade, we have witnessed an enormous increase in the ordeal faced by homebuyers at the hands of developers. The crisis of real estate is one which is less talked about in the country and about the working of the authorities. Just like the budget didn’t mention anything for the middle-class, similarly, there is less conversation amongst the authority, about the homebuyers who have spent amounts equal to their life-savings or loans of the huge interest rate.
Finally, the Supreme Court felt the need to take steps for the same. Backing the homebuyers in their fight against builders which duped them and facing insolvency proceedings, the Centre on Tuesday told the Supreme Court that there was no illegality in amendment brought by it in Insolvency and Bankruptcy Code (IBC) while giving them a say in the proceedings by classifying them as financial creditors like banks.
The Apex Court has asked the Centre to come out with a “uniform” proposal for all cases to resolve the difficulties being faced by lakhs of homebuyers who have not yet got possession of flats despite paying huge amounts of money to real estate builders and otherwise stand to gain nothing if the liquidation process goes through.
The Amrapali Zodiac Society located in Noida’s sector 120 is one such property that has provided huge troubles to the buyers. Akhilesh is among the 42,000 homebuyers who have approached the Supreme Court after the real estate company Amrapali defaulted on providing the flats to the buyers. He waited for eight years after buying the flat, hoping the construction work will be over soon. “I did not have any other option,” Akhilesh said in a report. “If the date of possession is considered as December 2012, then from January 2013 at the rate of 1325 square feet, it comes to Rs 13,250 per month. Compensation worth Rs 10,33,000 is due.” He added. Though he is not the only one who has decided to move into a half-built home.
Over 20,000 homebuyers of Jaypee projects, who were cheated of nearly Rs 14,000 crore, moved an application in the top court claiming that in the liquidation process, homebuyers were being classified as “unsecured creditors” under the IBC, thereby making them the last to be benefitted. It will be the banks and other secured creditors who will receive the largesse from the liquidation process, the application stated.
“This issue will be bothering lakhs of homebuyers. Within the IBC we cannot do anything. But outside it, you (Centre) can suggest something. We can consider that,” the bench told Additional Solicitor General (ASG) Madhavi Divan, who was appearing for the Centre.
The Court did not restrict the issue to Amrapali alone, considering the fact that similar fate faces the homebuyers of Jaypee Group and Unitech too. “As a policy, it is for the Union of India to propose. We are keen to know if you have something to suggest,” the bench said. The fresh plea filed in the top court has sought a direction that an “independent and thorough forensic audit” of JIL should be conducted from the date of its incorporation.
The order by the Court came as a ray of hope for the Jaypee homebuyers, who have approached the Court for the second time now. The real estate companies have challenged the validity of section 5(8)(f) of the Insolvency and Bankruptcy Code 2016 which ensures inclusion of home buyers as a financial creditor under the code. The Centre, however, said that amendment was brought to insert an explanation to the definition of financial debt to clear the doubt on inclusion of homebuyers within the ambit of financial creditors.
Responding to a batch of more than 140 petitions filed by different real estate companies challenging constitutional validity of the amendment in IBC, the Centre filed its affidavit in the apex court and said that the law was amended to protect the interest of lakhs of home buyers who had invested their hard earned money to purchase flats but were cheated by the companies.
It said that amendment was brought after the apex court itself had in 2017 expressed concern over the plight of homebuyers and had said that they should be represented in the Committee of Creditors under IBC. Now till the Court doesn’t present a view on this officially, the buyers will have to be cautious while approaching National Company Law Tribunal under the IBC. However, wondering how will the Supreme Court manage to handle other bigger issues if the tasks of Centre are also to be taken care of by the Apex Court.