Recovering money may not be easy for homebuyers

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 in New Delhi.   

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. 

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, 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 others’ property?” he said.

On being asked about the nature of an asset being mortgaged and not yet in existence, when there is no tripartite agreement (between bank, buyer and builder),  Justice Kumar said that was another grey area. 

Meanwhile, according to recent amendments in the  I&B Code 2016 as well as regulations with respect to corporate persons, financial creditors can now choose an insolvency professional (authorised representative) through  electronic process. “This clarification was necessary to give effect to the rights of class of financial creditors of the existing CIRP, who may not be able to represent or attend the meeting of CoC, but now when they have a Authorised Representative available they can be represented properly”, said Daizy Chawla, senior partner, Singh & Associates.                         — PTI & TNS