Getting recognized as financial creditors under the Insolvency & Bankruptcy Code does not make it easy for homebuyers to recover their money from defaulting real estate players, as per NCLT President Justice M M Kumar. Unless the apex court comes to their rescue under Article 142 of Indian Constitution, there are many risks for homebuyers under the IBC, said Justice Kumar, while speaking at a seminar on "Restructuring of Stressed Assets - Current Scenario" by industry chamber PHDCCI here.
"It may not be that easy for the home buyers. It is not a cakewalk," he added.
Explaining why homebuyers still faced uncertainties in recovering their money under the amended IBC, Justice Kumar said it is not yet clear how they would be treated vis-a-vis secured creditors. "The home buyers, their fate even after they have become financial creditors, would still be suffixed in front of the secured creditors," he said.
As there are different types of financial creditors, how homebuyers would be categorised or if they must be treated as secured creditors is a debatable issue, Justice Kumar added. Moreover, he said there is also a question mark over the ownership of the property, for which the buyers had made payment.
On being asked that in case, if there is no tripartite agreement (between bank, buyer and builder), sales of future assets, which are being mortgaged and not come into existence, would that be a secured asset, Justice Kumar said that is a grey area.
"As I have said that this a grey area. The home buyers may not have a reason to celebrate as yet. I am frankly telling you. We do not know what type of... they would come before us and how we will decide," he said.
On May 24, the government amended the IBC allowing home buyers to be financial creditors of the company through an ordinance and yesterday Union Finance Minister Piyush Goyal introduced The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018 to replace it.
The amendments to the IBC are intended to give relief to homebuyers by recognising their status as financial creditors, thus giving them due representation in the Committee of Creditors (CoC) and making them an integral part of the decision-making process.