Group of homebuyers have filed multiple writ petition with the Supreme Court challenging the recent amendment brought in by the government in the Insolvency and Bankruptcy Code (IBC) which has put a minimum threshold on the number of home buyers that can approach the National Company Law Tribunal (NCLT) in order to start the liquidation process against the defaulting developer.
Government brought in an amendment under IBC in mid December to introduce a minimum threshold of 100 or 10 per cent home buyers whichever is lower required to take a defaulting developer to the NCLT for starting the liquidation process. The government later came out with an ordinance to clear this amendment.
Prior to this amendment even a single financial creditor, including a homebuyer, with claims of at least ₹1 lakh could move NCLT against the defaulting developer.
In the petition filed with the Supreme Court, homebuyers have argued that the amendment is arbitrary and discriminatory.
“Bringing a threshold just for homebuyers is arbitrary while there is no threshold for any other financial or operational creditors. Even a single financial or operational creditor (other than homebuyer) can file an application against the company with NCLT for starting of the liquidation process," said Piyush Singh,Partner, PSP Legal, a Delhi based law firm.
The writ petition has been filed on behalf of 11 homebuyers from Noida and Gurgaon.
Another writ petition has been filed by Centrik Legalistic on behalf of five homebuyers.
In the petitions homebuyers have argued that this amendment goes against the Supreme Court’s judgement passed in August which has put homebuyers at par with other financial creditors. “The other reason is the fact that the Supreme Court three judge bench has given the judgement on the constitutional validity upholding the rights of the home buyers as financial creditors in August 2019. In the very same order the argument given by the builder was that there should be a threshold for the homebuyer. The argument was negated by the Supreme Court in the pioneer judgement. This ordinance is nothing but an attempt to circumvent judgement passed by the Supreme Court," said Singh.
Homebuyers have argued against the amendment that it is practically impossible to bring in homebuyers together. “Most of the applications filed with NCLT are filed in cases of under construction projects and there is no mechanism through which a homebuyer who is willing to file an application under Section 7, to get the insolvency proceedings started against the defaulting developer, can contact other homebuyers." added Singh.
“The amendment that has been brought by the central government despite our objections is definitely unfair for the homebuyers. Now that the matter has moved to the Supreme Court, we hope that the Supreme Court will take cognizance of this issue and will give appropriate directions to the central government," Abhay Upadhyay, president, Forum For People’s Collective Efforts, a Kolkata-based consumer body
As per the amendment those who have already applied under NCLT but application is not accepted will have to abide by the changes and bring in the requisite number of homebuyers and apply again within 30 days.