Legal experts in the city are getting enquiries from home buyers on possible relief against errant builders for non-delivery of projects under the Insolvency and Bankruptcy Code 2016 (IBC), which deals mainly with default or failure in payment of dues.
Under the code, 180 days are given to arrive at a feasible solution involving a Resolution Professional (RP) on the default issue by formulating a Resolution Plan and the timeline can be extended by another 90 days by the adjudicating authority (NCLT). If no solution is found, the RP becomes liquidator by an Order of NCLT.
“Home buyers are enquiring about getting relief under the IBC in case of failure to deliver flats. However, against these expectations, there is a recent negative ruling on this issue,” said S. Dhanapal, senior partner, S. Dhanapal and Associates, Firm of Practising Company Secretaries, Chennai.
The National Company Law Tribunal, Principal Bench New Delhi, had rejected an application filed by Nikhil Mehta against AMR Infrastructure Limited for insolvency proceedings.
As per the agreement between the parties, the buyers had booked two commercial and one residential property, for which advances was paid. The agreement also provided for payment of a stipulated fixed amount as assured return on a monthly basis by AMR Infra till the date of delivery. AMR defaulted on the payments to the buyers, who went ahead with insolvency proceedings.
However, NCLT refused to admit the petition, saying that the buyers were not financial/operational creditors under the definition of IBC.
“Such a ruling might be used as a reference for dealing with future cases on the issue. However, we have to wait till the IBC evolves and how future verdicts are delivered. Therefore, looking at the current situation, the best way for seeking relief for non-delivery would be under Real Estate (Regulation and Development) Act 2016,” Mr. Dhanapal said.
The Tamil Nadu government has notified the rules for Real Estate (Regulation and Development) Act (RERA). The rule imposes strict punishment for non-delivery.
“RERA would be the right forum for non-delivery related issues. IBC relief may not be available when RERA comes into force,” Chennai-based advocate G. Shyam Sundar also said.
