Good news for homebuyers! SC maintains the change of IBC; gives them the status of the financial creditor. In great relief for homebuyers, the Supreme Court (SC) confirmed the amendment in the Bankruptcy and Insolvency Code (IBC) that homebuyers granted the rights of financial creditors.
Good news for homebuyers! SC maintains the change of IBC; gives them the status of financial creditor
Before the SC it was argued that homebuyers make an important contribution to financing before the start of construction, therefore, they should be granted financial creditor status
In great relief for homebuyers, the Supreme Court (SC) confirmed the amendment in the Bankruptcy and Insolvency Code (IBC) that homebuyers granted the rights of financial creditors.
Last year, section 5 (8) (f) of IBC was modified giving an explanation to include homebuyers as financial creditors. Pioneer Urban Land and infrastructure had declared themselves before the Supreme Court against the validity of Section 5 (8) (f) of IBC. Subsequently, more than 200 developers submitted a written request.
By rejecting developer resources, the SC has confirmed the status of homebuyers as financial creditors.
"The SC ruling reaffirms the rights of homebuyers as financial creditors under IBC. This is a milestone in terms of real home buyers. This may not be good news for investors/home buyers who started IBC. Against developers for seeking out their investments due to the current state of the real estate market, "said Abhilash Pillai, partner, Cyril Amarchand Mangaldas.
The higher court bank said only real estate buyers can appeal insolvency proceedings against developers.
Before the SC it was argued that buyers of real estate make an important contribution to financing before the start of construction, therefore, they should be granted financial creditor status.
"This is a historical opinion that would benefit the real estate sector. It is a great relief for homebuyers who have a cure, especially against developers who do not pay. We are grateful to the bank for giving buyers the opportunity to present their cases in support of the Union of India and the amendment of the Insolvency and Bankruptcy Code, 2016, "said Shohit Chaudhry, Lawyer in Registry, Supreme Court of India.
Now that homebuyers are included in the list of financial creditors, they can present their cases in section 7 of the IBC, which establishes the beginning of the commercial inventory liquidation process by the financial creditors. In fact, this means that financial creditors can initiate a process by which management can be changed.
"This will change the game because homebuyers who have been waiting for their homes for many years and the builders did not do any work on the ground floor. Now at least homebuyers have the option of starting the process of changing management and expect their homes Chaudhry added.
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