IBC amendment on homebuyers quorum challenged in apex court

The government had in 2018 amended the IBC to include homebuyers in the category of financial creditors, with the ability to sit in the meetings of the Committee of Creditors (CoC).

IBC amendment, IBC amendment act, homebuyers, Insolvency and Bankruptcy Code, IBC law, Bankruptcy law

At least three different homebuyers have moved the apex court with similar pleas that the amendment made by the central government was “patently illegal, manifestly arbitrary and the result of absolute colorable exercise of the powers vested with the executive”. (File)

Following the amendments to the Insolvency and Bankruptcy Code (IBC), which mandated that at least 100 homebuyers must collectively file insolvency application against a builder for it to be admitted, some homebuyers have approached the Supreme Court (SC) with a plea to set aside the changes made to the Code.

The government, on December 28, 2019, promulgated an Ordinance, which mandated that at least 100 homebuyers or 10 per cent of the total home buyers of a project must file an insolvency application together if it has to be admitted.

The petitioners have claimed that the ceiling of 100 homebuyers curtails their rights and it is an unreasonable ceiling. “The petitioner submits that the amendment ordinance is in the nature of ‘remedy with no remedy’ as it curtails the right of an individual homebuyer,” one of the petitioners said in her plea.

Earlier this year, the apex court, had in its judgment on August 9, upheld the amendments made to the IBC, which granted financial creditor status to homebuyers. In its judgment, a three-judge SC Bench led by Justice Rohinton Nariman said the Real Estate Regulation and Development Act (RERA) must be read harmoniously with the IBC. The Bench had, however, said that while the two pieces of legislation must co-exist, “in the event of a clash, RERA must give way to the (IBC) Code”.

The government had in 2018 amended the IBC to include homebuyers in the category of financial creditors, with the ability to sit in the meetings of the Committee of Creditors (CoC).