Supreme Court upholds the amendment made to IBC to classify home buyers as creditors

The Supreme Court of India has upheld the amendments made to the Insolvency and Bankruptcy Code (IBC). This will help in classifying home buyers as financial creditors. The said amendment will benefit the customers at large.

The developers and real estate companies had argued that under Real Estate (Regulation and Development) Act (RERA) was a remedy already available to homebuyers and therefore this move was unnecessary. The Centre noted that the said amendment shall affect only defaulting companies and builders.

The Court noted that the IBC will be an additional forum. The provisions of RERA and IBC can work harmoniously.

A number of petitions by real estate companies challenged the amendment brought to the IBC by the Central government with respect to homebuyers. They had challenged the validity of Section 5(8)(f) of the IBC terming it as unconstitutional and unwarranted.

A bench headed by Justice R.F. Nariman noted that the said amendment provided relief to homebuyers as it gives them an additional platform to address their grievances. The Apex Court directed the Centre to fill vacancies in the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCALT) to handle the complaints and grievances against the developers and real estate owners.

The move comes as an initiative to safeguard the interests of home buyers, should they be cheated by real estate companies. This landmark judgement will curb issues faced by home buyers and will include the buyers in the committee of creditors.