HOMEBUYERS TO REMAIN CAUTIOUS BEFORE FILING AN APPLICATION AGAINST THE REAL ESTATE DEVELOPER/COMPANY:
The AAA Insolvency Professionals LLP Legal team has done an analysis of a recent judgment passed by the Hon'ble Supreme Court in the matter of Pioneer Urban Land and Infrastructure Limited and Anr. v. Union of India where a challenged was preferred by builders against the status of financial creditor accorded to the homebuyers' under the Insolvency and Bankruptcy Code, 2016 ('IBC'). As per the decision rendered by the Supreme Court, once prima facie default is made out on an application under section 7 of the Code, the burden shifts on the promoter/real estate developer to establish that:-
Allottee is himself a defaulter;
Insolvency Process has been invoked fraudulently;
Allottee is a speculative investment and not genuinely interested in purchasing a flat/apartment;
Allottee does not go ahead with an obligation to take possession of the unit.
Once the promoter/developer fails to establish any of the above-mentioned points, the NCLT shall admit the petition filed by the Homebuyer(s) and push the Company into Corporate Insolvency Resolution Process.
The Supreme Court also categorically added that Real Estate (Regulation and Development) Act ('RERA') and IBC must be read harmoniously, however, in case of a conflict, IBC shall take precedence over RERA.
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