Economy

Insolvency ordinance: Home buyers get some reprieve as SC orders status quo on pending cases

KR Srivats New Delhi | Updated on January 13, 2020 Published on January 13, 2020

Representative image   -  istock.com/Witthaya Prasongsin

SC issues notice to Centre as several home buyers challenge the constitutional validity of ordinance

Home buyers whose petitions were pending before the NCLT for trigger of IBC against defaulting realty developers have cause for cheer.

This is because the Supreme Court on Monday ordered status quo on pending cases before the NCLT in the wake of several home buyers approaching the apex court with writ petitions challenging the constitutional validity of the insolvency ordinance promulgated in December 2019.

This apex court direction would ensure that no pending cases would be dismissed in the light of Ordinance stipulation, say legal experts.

The Insolvency ordinance of December 27 had stipulated that at least 100 home buyers or 10 per cent of total allottees of a project, whichever is lower should come together to file petition for triggering IBC.

This stipulation also came with a proviso that in respect of all existing cases, a 30-day window would be given to existing petitioners to conform to the new requirement in the ordinance.

If the applicant fails to file the modified application within the specified 30-day period, such application would be deemed to be withdrawn before its admission

Prior to the Ordinance, a single financial creditor, including a homebuyer, with claims of at least ₹1 lakh could also move NCLT against the defaulting developer.

Several home buyers have now in multiple writ petitions moved the Supreme Court, submitting that the ordinance move to introduce a threshold was “arbitrary” and “discriminatory” and violative of Article 14 of the Constitution.

Commenting on the Supreme Court move to issue notice to Centre and ordering status quo in pending cases, Akash Vajpai, an Advocate, told BusinessLine that he had in the Manish Kumar (home buyer) vs Union Of India matter (AOR was Vaibhav Manu Shrivastav) submitted to the apex court that “this ordinance is arbitrary and discriminatory and violates Article 14 of the Constitution as any one who has claim of more than ₹1 lakh against the real estate company can approach NCLT but a home buyer who has flat of more than ₹5 crore can’t”.

Aseem Chawla, Managing Partner, ASC Legal, a law firm, said: “Today comes as a day of respite for homebuyers from the apex court. The earlier IBC threshold suggested in the ordinance both relatable to 100 number of buyers or 10 per cent could not have been viewed as reasonable in all situations tilting the scales against the homebuyers. With the Court ordering a status quo, no pending cases would be dismissed in the light of ordinance stipulation”.

Published on January 13, 2020
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