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In a first, NCLT starts insolvency proceedings on homebuyer’s plea

Earlier, homebuyers were at the receiving end in insolvency proceeding as they did not have a say and their interests were put at the bottom in the priority list.

Updated: Aug 26, 2019, 10.04 AM IST
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(This story originally appeared in on Aug 25, 2019)
NEW DELHI: In the first case after the Insolvency and Bankruptcy Code was amended and later upheld by the Supreme Court to give home-buyers the status of financial creditors, National Company Law Tribunal has initiated insolvency proceedings against a real estate company on a homebuyer’s petition.

The tribunal has invoked IBC against Delhi-based real estate company, Umang Realtech Ltd, after it failed to deliver possession of a flat to the homebuyer couple who had invested around Rs one crore in 2012 in its Gurugram project— Winter Hills 77— and was assured to get the flat by end of 2015. As the company failed to deliver the flat even by 2018, the couple filed a petition in the tribunal for refund of their money with interest.

Earlier, homebuyers were at the receiving end in insolvency proceeding as they did not have a say and their interests were put at the bottom in the priority list. But after the apex court asked the Centre to intervene to protect their interests, the government amended the law in August last year and home-buyers were given status of financial creditors on par with lender banks. The amendment was challenged in the SC which on August 9 upheld it saying IBC is a beneficial legislation to protect the interests of home-buyers who invested their money and there was no illegality in giving them a say in insolvency proceedings.

The apex court, which had stayed proceedings in various company law tribunals, lifted the stay and allowed the tribunal to proceed in the cases. A fortnight after the SC order, NCLT has invoked the amended IBC to initiate corporate insolvency resolution process against the defaulting builder and allowed the plea of the home-buyer.

A bench of Justice M M Kumar and Deepti Mukesh appointed Manish Kumar Gupta as an interim resolution professional (IRP) to manage the affairs of the company. It directed him to make public announcement about its order so that banks and other creditors could place their claims against the defaulting company and collate all the claims and place before it.

The tribunal accepted the plea of homebuyer’s lawyer, Aditya Parolia, who submitted that his client was suffering because of delay in the project as they had taken a loan of Rs 75 lakh from bank and have been paying interest for the last seven years. Opposing the plea, the company contended that no default had occurred on its part as the buyer had not terminated the agreement.

“In construing the terms of such contracts, it must be remembered that the allottee enjoys hardly any bargaining power to negotiate a clause in the agreement...There is extraordinary delay of about two and half years in delivering possession and the allottee cannot be put to ransom by strict construction that the contract is not determined,” the tribunal noted.

The National Company Law Tribunal also restrained Umang Realtech and its promoters and directors from transferring or alienating any assets and directed them to extend every assistance and cooperation to IPR in running the affairs of the company.

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