Recovering money from builders may not be easier for home buyers

CoC should act fast

It is not a "cakewalk" and may not be easy for homebuyers to recover their money from defaulting real estate players, even after becoming financial creditors under the Insolvency & Bankruptcy Code, according to NCLT President Justice M M Kumar.

Unless the Supreme Court comes to their rescue, there are many risks for homebuyers under the IBC, said Justice Kumar, while speaking at a seminar on "Restructuring of Stressed Assets - Current Scenario" by industry chamber PHDCCI here. "Homebuyers, after becoming financial creditors, under the IBC (after amendments) may not be a happy lot," Justice Kumar said.

He further said if the Supreme Court exercises its power under Article 142 of Indian Constitution, "that may come to their rescue, otherwise there are many risks, legally speaking". “It may not be that easy for the home buyers. It is not a cakewalk,” he added.

Explaining why homebuyers still faced uncertainties in recovering their money under the amended IBC, Justice Kumar said there is a question mark on how they would be treated vis-a-vis secured creditors.

"The home buyers, their fate even after they have become financial creditors, would still be suffixed in front of the secured creditors," he said. As there are different types of financial creditors, how homebuyers would be categorised or if they must be treated as secured creditors is a debatable issue, Justice Kumar added.

Moreover, he said there is also a question mark over the ownership of the property, for which the buyers had made payment.

"Whether the payment given by them (homebuyers) would be considered as legal owned property or NEW DELHI: The lenders of the companies, which are going through corporate insolvency resolution process, should act swiftly while taking decision as any delay erodes the value of assets, said M M Kumar. The Committee of Creditors (CoC) should be represented by senior authorised people, who can take decision on spot in the meeting, he said. "If Corporate Insolvency Resolution Process is to be taken seriously, the CoC must come with members who are fully authorised to take decision then and there, and not by circulation.”

others' property?" he said.

On being asked that in case, if there is no tripartite agreement (between bank, buyer and builder), sales of future assets, which are being mortgaged and not come into existence, would that be a secured asset, Justice Kumar said that is a grey area.

"As I have said that this a grey area. The home buyers may not have a reason to celebrate as yet.”