Why homebuyers prefer NCLT over RERA?

NEW DELHI: Chander Bhusan bought a 2BHK apartment in a high-rise society in Greater Noida (West). After waiting for almost two years for the possession of his flat, he decided to move Uttar Pradesh

RERA

(Real Estate Regulatory Authority) to claim delay penalty. In the conciliation forum, he was given a delay penalty of MCLR +1%. He was not happy with the order and wants to file a case in the

National Company Law Tribunal

(NCLT) to ask for a refund from the builder and claim interest from the time when he had booked his flat.


Hundreds of homebuyers like Bhusan are moving NCLT to claim refunds, leading to many real estate companies into the insolvency process. Actually, getting the RERA orders implemented has become a challenge for buyers.

Rajendra Kumar, NCLT expert, says, “When a buyer goes to NCDRC and RERA, he gets a refund order but when this is not implemented, he has to ultimately approach NCLT. So, buyers think that instead of going to different forums why not approach NCLT and get a refund. Builders should communicate to buyers in case of delay or any other issue and resolve their problems. They need to win the buyers' trust to stop them from going to NCLT.”

In August this year, Supreme Court upheld the constitutional validity of amendments made to the Insolvency and Bankruptcy Code (IBC) which conferred the 'financial creditors' status to homebuyers and entitled them to be a part of the Committee of Creditors (CoC) to safeguard their interests.

Considering this, the government is looking at further amendments in IBC to create a minimum threshold to stop the misuse of provisions, indicated the secretary, ministry of corporate affairs, Injeti Srinivas at an event on Tuesday. “Half of the cause list for insolvency cases are filled with real estate. There is a need to check abuse and maximise the value of assets,” he said.

This will ensure that not a single homebuyer misuses the provisions for taking real estate developers to the National Company Law Tribunal (NCLT). Homebuyers are treated as financial creditors under IBC.

Piyush Singh, advocate NCLT, says, “The government has not yet implemented the amendment, though it has been indicated by the secretary in one event. No threshold limit is required in case of banks and other lenders as anyone with a Rs 1 lakh claim can approach NCLT and initiate resolution. We will also meet the finance minister and discuss the buyers’ point of view. If such an amendment is made, then it will take away the buyers’ legal right. Homebuyers are coming to NCLT asking for refunds after waiting for years for their homes. RERA orders are not really being implemented and NCLT is offering them a quick resolution. Homebuyers should be given more legal rights.”

However, builders feel that RERA is there to tackle the real estate issues. Builders should be given time as per the new deadlines given by them to complete their projects.

“Supreme Court has already made an observation in the Pioneer Urban case that NCLT should not entertain cases where a speculative buyer or an investor is trying to misuse the IBC provisions to get his money back in a falling market. Why NCLT is not taking cognizance of that order? Where there is merit you can go to NCLT but not in cases where the project is delivered and people are living there,” says Getamber Anand, former chairman, CREDAI National.

NCLT has become a popular choice among consumers today for claiming refund with interest from developers. However, developers believe that the priority should be to complete the stuck projects. Buyers say that RERA orders are not getting implemented and this is forcing them to approach NCLT. How will a new IBC amendment be implemented and address both buyers and builders’ issues, needs to be seen in time to come.