The Supreme Court of India has reinforced the legality of the Insolvency and Bankruptcy Code (Second Amendment) Act of August 2018, bestowing home buyers with the title of “financial creditors”. This status essentially empowers them to influence key decisions in the Committee of Creditors. The act has also allowed these financial creditors to launch bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC) of 2016 and maintains their significant position on the Committee of Creditors (CoC).
The Role and Importance of the Committee of Creditors (CoC)
The CoC plays a crucial role in influencing the destiny of bankrupt builders – they are entrusted with determining the fate of their assets and deciding who should be put in charge of unfinished housing projects. As per the revised legislation, home buyers are now able to initiate bankruptcy proceedings against any deceptive real estate builders under section 7 of the IBC.
Prior Laws and the Plight of Home Buyers
Prior to the advent of the Amendment Act of 2018, the assets of an insolvent builder were typically allocated among his workers, banks that extended credit to him, and other operational creditors. Home buyers were seldom considered during this distribution process, despite the fact that they can often contribute anywhere from 50% to 100% of a project’s total financing.
Empowering Home Buyers: A Historical Decision
However, the landmark amendment effectively puts an end to this injustice, giving homebuyers their rightful place in the creditors’ committee. With this new legal standing, homebuyers have gained the right to initiate legal actions against unscrupulous developers, representing a significant shift in their standing within India’s real estate industry.
| Fact | Details |
|---|---|
| Law | Insolvency and Bankruptcy Code (Second Amendment) Act of 2018 |
| Status | Home buyers considered as “financial creditors” |
| New Power | Able to vote in the Committee of Creditors |
| Justice | Can launch bankruptcy proceedings under section 7 of IBC |
Legal Remedies Available to Home Buyers
With the passing of the amendment, homebuyers have been provided with various legal avenues to remedy their grievances. Besides sparking bankruptcy proceedings, they can also bring their cases before a consumer court and the Real Estate Regulatory Authorities (RERA). This legal empowerment of home buyers signifies a significant milestone in ensuring transparency and accountability within the real estate sector.
