RERA & IBC sister acts, says SC
Dismissing the plea of over 200 real estate companies holding the Insolvency and Bankruptcy Code (IBC) illegal and unconstitutional, a Supreme Court bench headed by Justice RF Nariman upheld the right of homebuyers for redressal under the new Code.
In effect homebuyers will be considered financial creditors to the real estate companies and can take recourse to the IBC against defaulting developers.
The Bench in its judgement on August 9, held that the RERA Act, which regulates the real estate sector, should be read with the IBC amendments. But in case of any conflict between RERA and IBC, the latter prevails, the court made clear.
The consumers have the option of seeking remedy under any provision — the Consumer Protection Act, IBCor RERA, it added.
“It’s a landmark judgment as the amendment has been upheld,” said Ashwarya Sinha, advocate who had represented some of the homebuyers in the case. “Additionally, it will settle a lot of teething issues faced by forums, including NCLT/consumer forums/RERA, across the country. Further, as per the judgment some additional defences unique to IBC have also been added.”
SC also directed the Centre to fill up vacancies in the National Company Law Tribunal and Appellate Tribunal to handle the rising number of cases filed against companies under IBC.