IBC amendments provide remedies to hassled homebuyers: SC

The Supreme Court on Friday held that recent amendments to the Insolvency and Bankruptcy Code (IBC) provides additional remedies to hassled homebuyers to safeguard their interest in case of delayed possession or non-completion of projects by real estate developers. The top court held that the Real Estate (Regulation and Development) Act, 2016, which regulates the real estate sector, has to be read harmoniously and in case of conflict with the RERA, the IBC will prevail.

A bench of Justices R F Nariman, Sanjiv Khanna and Surya Kant said, "The RERA is to be read harmoniously with the Code, as amended by the Amendment Act. It is only in the event of conflict that the Code will prevail over the RERA. Remedies that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code." The bench rejected the contention of real estate developers that RERA is a special enactment housing projects and must, therefore, be given precedence over the IBC, which is only a general enactment dealing with insolvency generally.

"The fact that RERA is in addition to and not in derogation of the provisions of any other law for the time being in force, also makes it clear that the remedies under RERA to allottees were intended to be additional and not exclusive remedies," the bench said and added that as a matter of fact, the IBC and RERA operate in completely different spheres. In its 186-page verdict, the bench said that "the IBC deals with a proceeding in rem in which the focus is the rehabilitation of the corporate debtor. This is to take place by replacing the management of the corporate debtor by means of a resolution plan which must be accepted by 66 per cent of the Committee of Creditors, which is now put at the helm of affairs, in deciding the fate of the corporate debtor".

The top court dealing with the IBC and RERA said that under the IBC a resolution plan is put by which the same or another management in the saddle, "so that the corporate debtor may be pulled out of the woods and may continue as a going concern, thus benefitting all stakeholders involved. It is only as a last resort that winding up of the corporate debtor is resorted to, so that its assets may be liquidated and paid out in the manner provided...". With regard to RERA said that the Act protects the interests of the individual investor in real estate projects by requiring the promoter to strictly adhere to its provisions.

"The object of RERA is to see that real estate projects come to fruition within the stated period and to see that allottees of such projects are not left in the lurch and are finally able to realise their dream of a home, or be paid compensation if such dream is shattered, or at least get back money that they had advanced towards the project with interest," it said. The top court, however, made it clear that the "recalcitrant allottees are not to be tolerated, as they must also perform their part of the bargain, namely, to pay instalments as and when they become due and payable".