In a recent landmark judgment, namely Vishal Chelani and others v. Debashis Nanda, the Supreme Court of India has underscored the imperative of upholding the legal rights of homebuyers within the framework of the Insolvency and Bankruptcy Code (IBC) of 2016. The case in question pertained to the treatment of homebuyers who had obtained orders from the Real Estate (Regulation and Development) Act (RERA) Authority, and the Supreme Court's verdict established a precedent against discriminating between these homebuyers and other financial creditors under the IBC.
The subject case revolved around a group of homebuyers who had entered into agreements to purchase residential units in the Bulland Elevates project, which was being developed by Bulland Buildtech Pvt Ltd during the years 2011-2012. Owing to considerable delays in the project's completion, these homebuyers sought recourse through the Uttar Pradesh Real Estate Regulatory Authority (UPRERA) and were subsequently granted a decree entitling them to a refund along with accrued interest. Concurrently, insolvency proceedings were initiated against the corporate debtor, Bulland Buildtech.
The crux of the matter lay in how these homebuyers should be categorized within the framework of the IBC. The Resolution Professional (RP) overseeing the case argued that homebuyers who had sought remedies under RERA ought to be designated as unsecured financial creditors, thus placing them in a separate category from other homebuyers. This reclassification subjected them to the requirement of making an additional payment equivalent to 50% of the prevailing market value of their units, or alternatively, accepting reduced settlements as outlined in the Resolution Plan. The RP's contention was primarily grounded in Section 18 of RERA, which suggested that the appellants had voluntarily relinquished their rights by opting for remedies under the said Act.
However, the Supreme Court, through its judgment delivered by a bench comprising Justices S Ravindra Bhat and Aravind Kumar, clarified that the IBC inherently makes no distinctions among various classes of financial creditors when formulating a resolution plan, as evidenced in Section 5(8)(f) of the IBC.
The Court also discredited the RP's argument that the homebuyers, by pursuing remedies through RERA, had waived their rights and thus should be accorded different treatment. The Court emphatically asserted that only homebuyers were eligible to approach RERA for remedies, and consequently, differentiating among them based on their engagement with RERA was inherently unjust.
To support its verdict, the Supreme Court referenced a prior ruling by the National Company Law Tribunal (NCLT), Mumbai Bench, in the case of Mr. Natwar Agrawal (HUF) v. Ms. Ssakash Developers & Builders Pvt. Ltd. In this precedent-setting case, it was established that an allottee in a real estate project who subsequently becomes a decree holder under the RERA Act should continue to be regarded as a creditor within the classification of homebuyers, and therefore, they should be governed by the IBC's stipulated threshold limits.
The Supreme Court posited that the underlying claim of a party aggrieved by the delay or default in delivery of real estate property, as crystallized in the form of a court order or decree, does not alter or modify their status, particularly in the case of allottees who should be considered financial creditors. Consequently, the Court invoked Section 238 of the IBC, which encompasses a non-obstante clause, to emphasize that the IBC's provisions take precedence and cannot be subordinated to other statutes, thereby safeguarding the rights and interests of homebuyers within the ambit of the insolvency resolution process.
In conclusion, the Supreme Court's verdict serves to establish that homebuyers who have sought relief through RERA should not be erroneously categorized as unsecured financial creditors within the IBC. This judgment not only affords legal clarity but also reinforces the status of homebuyers as financial creditors, underscoring the paramount importance of Section 238 of the IBC. This ruling resolutely conveys that the provisions of the IBC are of paramount significance and should not be diluted or displaced by other statutes, thereby upholding and preserving the rights and interests of homebuyers throughout the insolvency resolution process.