Vishal Chelani and others v/s Debashis Nanda; Civil Appeal No. 3806 OF 2023
In a recent landmark judgment, the Supreme Court of India has made a significant decision regarding the treatment of home buyers who have secured RERA (Real Estate Regulation and Development Act) decrees in cases of insolvency. The ruling establishes that these home buyers cannot be discriminated against or treated differently from other financial creditors under the Insolvency and Bankruptcy Code (IBC). The case in question revolved around a dispute between a real estate company and home buyers who had invested in one of its projects. The company had entered insolvency proceedings, and the home buyers were pursuing refunds of their investments.
The issue before the Hon’ble Court pertained to whether home buyers who had secured RERA decrees should be given distinct treatment compared to other financial creditors under the IBC. The Committee of Creditors had proposed a resolution plan that made a differentiation between home buyers who had opted for other remedies, such as seeking relief under the RERA and securing favourable orders, and those who had not pursued this avenue. The latter group was offered more favourable terms, a distinction that was deemed unfair by the home buyers with RERA decrees.
In its ruling, the Supreme Court emphasized the primacy of the IBC provisions over the RERA Act and declared the distinction drawn by the resolution plan as artificial. The Hon’ble Court noted that RERA provided exclusive remedies for home buyers, and treating a particular segment of that class differently for the purposes of another enactment would be highly inequitable. The Court further observed that the underlying claim of an aggrieved party was crystallized in the form of a court order or decree and that this did not alter or disturb the status of the concerned party as a financial creditor.
The significance of this judgment is not limited to the legal sphere but extends to its practical implications for home buyers who have invested in real estate projects and are seeking restitution. The ruling ensures that home buyers who have obtained RERA decrees are entitled to the same treatment as other financial creditors under the IBC. This decision promotes transparency and equity in insolvency cases, providing assurance to home buyers that their interests are safeguarded even in the event of a real estate company facing insolvency.
Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate
Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/
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