Should Homebuyers Who Secure Decree For Refund From RERA Be Treated As Financial Creditors? Supreme Court To Decide

The Supreme has agreed to decide the question of law whether homebuyers, who secure a decree from the Real Estate Regulatory Authority for a refund of their investment, should be treated as financial creditors under the Insolvency and Bankruptcy Code 2016.

The bench comprising Justices S Ravindra Bhat and Justice Prashant Kumar Mishra on Monday(Aug 14) was hearing an appeal against a judgment delivered by the National Company Law Appellate Tribunal which had held that once a homebuyer in held to be entitled to refund, he’ll be considered as a financial creditor and that their claim cannot be admitted as of homebuyers.

The appellant contended before the Supreme Court that his status would remain the same as homebuyer and would not change even if there is a decree passed in their favour by the RERA. He submitted that NCLT in various judgments had held that- “once a homebuyer, always a homebuyer”.

BACKGROUND OF THE CASE

The appellant filed a complaint before the Uttar Pradesh Real Estate Regulatory Authority(UP RERA) under section 31 of the UP RERA Act, 2016 which was admitted in 2019. A recovery certificate was issued for refund of the amount to the appellant for the purchase of a flat.

The builder company was undergoing resolution process. The Interim Resolution Professional rejected the claim raised by the appellant as a homebuyer and asked him to resubmit his claim as a financial creditor.

 The NCLAT relied on the Supreme Court’s decision in Kotak Mahindra Bank Limited v. A. Balakrishnan & Anr(2022) which held that “once the Recovery Certificate has been issued, the party in possession of the Recovery Certificate is to be considered as a Financial Creditor”. Therefore, NCLAT dismissed the matter in view of the same.

Aggrieved by it, the appellant approached the Supreme Court.

Case title: Vishal Chelani v Debashis Nanda

Citation: C.A. No. 3806/2023