NCLT Initiates Insolvency Proceedings Against Builder On Homebuyers' Plea

The allottees of the flat (homebuyers) had entered into a Flat Buyers Agreement for allotment of flats in a residential project at Noida, with Today Homes during 2011-13, and had paid almost 90% of the purchase value. As per the agreement, the allottees were supposed to get possession in 2016, but till date they had neither received possession, nor been refunded the amount paid for the allotment, despite repeated requests.

The homebuyers submitted that since the delivery of possession didn't take place on time, there was an existence of 'financial debt' and 'default' under the Code.

The real estate firm Today Homes in its defense through Advocate Vivek Sibal, submitted that, after registration of the project under the RERA Act, which came in 2016, the last date for completion of the project has been extended till 30^th June, 2021 and hence, they had not committed any default.

The NCLT Bench comprising of Justice M M Kumar and Deepti Mukesh, after hearing the parties, rejected the averments of Today Homes. The Bench observed that, the extension for project completion under RERA could not absolve the real estate firm of its duty to the allottees, as the provisions of IBC would override that of RERA and secondly, the 'homebuyer' was not party to such transaction.

The Tribunal at Delhi proceeded to initiate corporate insolvency resolution process against Today Homes and appointed Mr. Rabindra Kumar Mintri as the Interim Resolution Professional.

Since the constitutional validity of the amendment to the Insolvency and Bankruptcy Code, 2016 (IBC), treating 'homebuyers' at par with financial creditors, was under challenge in the Supreme Court, NCLT had stayed the pronouncement of the order.

The Supreme Court in the matter Pioneer Urban Land and Infrastructure Limited vs. Union of India upheld the validity of the amended section 5(8)(f) of the IBC, after which the Tribunal proceeded to hear the homebuyers' pleas.