A fresh plea has been filed in the apex court seeking protection of the rights and financial interests of lakhs of home buyers, subsequent to the initiation of insolvency proceedings against real estate firms by banks and financial institutions (FIs).
The PIL, filed by lawyer Vivek Narayan Sharma, claims that in the new Insolvency and Bankruptcy (IB) Code, 2016, the home buyers are not included in the definition of "Financial Creditors or Operational Creditors", but ranked the last in the list of creditors whose claims could be settled during the insolvency proceedings. The PIL is up for hearing on October 6 by a bench headed by Chief Justice Dipak Misra.
Apart from challenging the constitutionality of certain provisions of the insolvency code, the plea seeks empowerment of home buyers, who have not received possession of their booked dream homes, to initiate "corporate insolvency resolution process" against the errant real estate firms.
It also said that the IB Code should not restrict the playing out of provisions of RERA (Real Estate (Regulation and Development) Act, 2016) that favours home buyers. Currently, the moment insolvency proceedings are initiated against a real estate firm, execution of enforceable decrees of courts and the consumer fora are rendered ineffective as they cannot be executed. Moreover, no fresh cases can be pursued by hassled home buyers against such firms.
The plea has also sought "forensic auditing" of real estate firms to determine the contributions of the home buyers and safeguarding their invested money. The forensic audit would establish whether the real estate firms, which have taken money from the home buyers, have diverted these funds.
"The principle view in filing the instant petition is that lakhs of home buyers in thousands of projects can lose their life-savings, hard-earned money and moneys obtained through bank/institutional loans due to the operation of Insolvency and Bankruptcy Code," the plea said.
It raised the question as to how the liquidation value would be calculated for home buyers where deliveries of flats have been delayed. The plea has also sought a direction to provide a mechanism under the IB Code to calculate the liquidation value for home buyers, where deliveries of flats have been delayed, and further declare that the liquidation value would also account for interest on payments made to developers as envisaged in RERA.