The Homebuyers Conundrum in Real Estate Insolvency
By: Ms. Mehreen Garg and Prof. Arjya B. Majumdar*
The purpose of the IBC, ostensibly, is to provide a speedy resolution of issues arising out of the solvency of corporate debtors in a timely manner and to balance the interests of stakeholders. The amendments of 2020 and 2022 which pertain to the rights of homeowners reveal the intention of the legislature to be responsive of the needs of various stakeholders and to establish that insolvency issues in the real estate industry require a disparate approach. We argue that his approach, while laudable, is not yet complete. Homeowners are not treated as secured creditors and do not have a security in the very properties that they have an interest in. An interest in property against payment of money later convertible into a debt would automatically create a lien, an encumbrance or a charge against the debtor.
Even if the property has not been clearly earmarked as part of the builder buyer agreement, or even if the property has not even been created, the homeowner’s primary claim would be to receive the property that it had paid for. Under the RERA and as part of the builder buyer agreement, the homeowner has a dual remedy to either receive immoveable property or to have their money returned to them with interest. This paper argues that this dual remedy gives rise to a charge in favour of the homeowner. In the real estate industry, homeowners often spend their life savings to purchase homes and must be protected atleast to the same extent as that of other secured creditors.
I. INTRODUCTION
Following widespread calls1 to completely revamp and take a fresh look at bankruptcy laws in India, the present Insolvency and Bankruptcy Code, 2016 (the “IBC”) replaced the Sick Industrial Companies (Special Provisions) Act, 1986 (the “SICA”) and a number of relevant provisions in the Indian Companies Act 2013 along with other related legislations2. Inspired by the UK Insolvency Act of 19863, the IBC moves away from a “debtor in possession” approach, which was previously the position in the SICA to a more “creditor in control” approach4.
In its early years, the Supreme Court, various benches of the National Company Law Tribunal (the “NCLT“), and the National Company Law Appellate Tribunal (“NCLAT“) issued a number of judgments analysing and interpreting various provisions of the IBC, many of which were quickly incorporated into the code.5
Modern insolvency law protects the interests of secured creditors well, but not employees, workmen, customers, tort victims, or environmental claimants6. However, it is also well understood that public policy is an ever-growing work in progress and will continue to develop and grow 7. In the context of IBC, one category of stakeholders that continues to draw attention is the allottee (or homebuyer) of a real estate project.
Literature Review
Before establishing the research questions and framework of this paper, it may be helpful to examine the existing literature on the topic.
Akshaya Kamalnath stresses the need for the implementation of a “modified Revlon duty” when a nearly bankrupt corporation solicits bids to ensure that no value is lost due to directors’ unwillingness to relinquish control of the company. Directors under this model are obligated
to either reorganize the firm (or make good faith attempts to restructure) outside of the IBC procedure or to submit the company to the IBC’s insolvency resolution process8.
Ankeeta Gupta examines the Code’s provisions critically, with a discussion of the successes and difficulties that have arisen as a result of the Code’s implementation9. Alam, Pradhan and Raza examine whether the Court has just interpreted the language of the Code or if it has additionally built the interpretation of the Code’s unclear and obscure sections. They note firstly, that the Code has been revised several times since its implementation10 – possibly no other Act has been amended so frequently in such a short period of time. Second, the Court issued its first decision on the Code in less than nine months, and in less than four years, it had discussed about two hundred judgements. Thirdly, the Indian Parliament has changed the Code to include the Court’s rulings, an uncommon occurrence in India that has occurred quite swiftly11.
Bajpai And Kapur discuss the Supreme Court judgment in Union of India v. Rajasthan Real Estate Regulatory Authority & Ors12. The article examines the discrepancy between the Real Estate (Regulation and Development) Act, 2016 (the “RERA”) and the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the “SARFAESI Act”). The authors opine that the Supreme Court’s ruling broadens the scope of RERA’s jurisdiction to include situations in which a complainant files a claim against a bank in its capacity as a secured creditor in the event that the bank invokes any of the remedies listed in Section 13(4) of the SARFAESI13.
Mathur argues that homeowners, as creditors without recourse have a decreased chance of recouping their investments14. Venkateshwaran15, Chora and Meenakshi Veetil analyze various judgments by the Supreme Court which raise the discussion about the rights of homebuyers as creditors of defaulting real estate developers under Indian law16. Feibelman provides an overview of the IBC and speculates on its potential effects once it is fully implemented, suggesting that that at least initially, the IBC will serve largely as a creditor’s remedy and offer unsatisfactory insurance for individual and household creditors17. On a similar note, Khare analyzes the evolution of the IBC18. Zwieten discusses the history and features of the IBC19. Mishra and Pandey bring attention to the the extensive and innovative efforts made by the legislative and judicial branches to safeguard the interests of homebuyers and real estate enterprises in financial distress20.
Kokorin examines “conflict of interest” in group insolvency and intra-group financial arrangements. It examines methods to regulate and reduce conflict-of-interest concerns while guaranteeing cross-border cooperation and communication. It aims to reconcile the application of generic procedural effectiveness principles with the special demands of multinational (cross- border) enterprise group insolvencies21. Pandya discusses the features of the IBC in depth and provides a comparative analysis of the insolvency processes followed in different jurisdictions. He further points out the issues faced by the current framework and provides recommendations to ensure a smoother functioning of the IBC22. Dutta takes a law and economics approach to uncover the roots of value destruction and wealth transfer in the 2016 Insolvency and Bankruptcy Code23.
Pryor and Garg analyze that the administration of the CIRP is deeply threatened by concerns of abuse of power by the CoCs. They raise questions over the legality of the resolution process due to the lack of information concerning the scope and quality of review of judgments by CoCs24. Mohan and Raj discuss the discrimination persisting between real estate developers and other operational debtors. They also comparatively analyse the situation of homebuyers as creditors in the UK and USA25.
Shah and Diljit argue that there remains an irreconcilable relationship between the two stakeholders of real estate- the homebuyers and the real estate developers and propose a framework for their harmonious reconciliation26. Kattadiyil gives a brief overview of the status of homebuyers as financial creditors and provides a comparative analysis of IBC, RERA and CPA27. Iheme raises the issue that over 90% of Indian enterprises are small and family-owned, which is at odds with the insolvency resolution method outlined in the Code. Further, he proposed to tackle the various issues faced by the IBC framework by adopting laws from the English legal system, U.S. Title 11, and Article 9 of the Uniform Commercial Code28.
Research Questions
We seek to trace the development of the IBC, with a focus on allotees as creditors and to explain the present position of allotees as limited or unsecured financial creditors. Through a doctrinal analysis of various judgments, we identify the challenges faced by the Adjudicating Authority and stakeholders in dealing with the insolvency of real estate companies.
We further consider the position of real estate allotees vis-à-vis other creditors and stakeholders and inherent conflicts of interest between various stakeholders within the IBC framework. We also examine the remedies available to allottees under the Real Estate Regulation Act, 2016 (the “RERA”) and how these work in tandem or subordinate to the IBC.
Recognizing the divergent needs and demands of various stakeholders under the IBC, we propose a harmonious construction of homebuyers rights available under the RERA as well as the IBC. We seek to offer solutions that redress the issues that have arisen in real estate insolvency by amendments in the IBC, without the need for a separate framework for the insolvency resolution of real estate companies.
Tentative Chapterisation
In this section, we set out the background of the paper, a brief review of existing secondary literature on the subject matter and the research questions that we seek to address. The second chapter traces the development of the IBC as an overhaul of insolvency laws in India and its inspirations in the UK Insolvency Act, 1986 and other extra-territorial legislations. We describe the development of the problem statement in the third chapter which concerns homebuyers or allottees. This description is supported through relevant case law and the amendments to the IBC in 2018 and 2020. Analysing the jurisprudence developed by courts and various amendments to the IBC, this chapter confirms the current position of allotees as limited or unsecured financial creditors. Further, using these resources we analyse the challenges faced by the Adjudicating Authority and stakeholders in dealing with the insolvency of real estate enterprises.
In chapter four, we examine the rights of homebuyers under the RERA. We seek to create a harmonious position, balancing the rights of homebuyers under the RERA against the rights of all stakeholders under the IBC. We go on to argue that in the case of real estate companies, there exists a need to create adjustments in the IBC framework to accommodate the unique position of allotees. We further argue that in such cases, allotees ought to be considered as secured financial creditors instead of the present position of limited or unsecured financial creditors. Chapter five summarizes, concludes and offers suggestions for further research
II. REVAMPING THE INSOLVENCY AND BANKRUPTCY LAW IN INDIA
Insolvency law lies at a unique intersection of various dimensions of law and economics29. As a result, the provisions of the IBC form a complex web of features adopted from a number of statutes including the insolvency laws in the UK and US amongst others as well as from UNCITRAL with more emphasis on the UK law30. Prior to the IBC, there was no overarching legislation in India to address company insolvency. While the Companies Act of 1956 governed the dissolution and liquidation of businesses, the SICA would govern their revival31.
Sick Industrial Companies (Special Provisions) Act 1985
The SICA was implemented to detect sick or unviable companies and also potentially sick industrial companies32. The SICA was enacted following the suggestions of the T. Tiwari Committee set up by the RBI in 198133 which were, in turn, influenced by Chapter 11 of the US- a formal process focused on the restructuring of a debtor’s financial obligations34. While the SICA was a commendable effort on behalf of the RBI to rehabilitate sick companies, there were a number of shortcomings in the legislation which did not allow it to efficiently target all insolvency issues35.
The report of the Committee on Industrial Sickness and Corporate Restructuring suggested that SICA’s aim was to help industrial companies, which often excluded MSMEs in the country36. The report also argued that SICA created an imbalance between debtors and creditors by heavily relying provisions in the favour of debtors.37 Under SICA, applications could be filed after confirming the balance sheet of the companies. This led to fraudulent management of corporate debtors forging their books of accounts to potentially escape liability towards their corporate creditors38. As a result and fraught with delays, the insolvency process under SICA failed.
The Eradi Committee Report
In October 1999, the government set up the Eradi Committee which was tasked to review the then-existing laws on insolvency and restructuring of companies and suggest reforms in the insolvency process within the legislation39. The committee observed that High Courts in India held jurisdiction over matters of insolvency and winding up of companies. Therefore, it was suggested that a National Tribunal be established by amending Article 323B of the Constitution, updating the Companies Act of 1956 and by the repeal of SICA40. The Committee noted that the Indian legislation on companies closely resembles the UK law on winding up, which is now codified as a distinct statute from the Companies Act and known as the U.K. Insolvency Act, 1986.
Bankruptcy Law Reform Committee
In his Budget Speech for the year 2015–16, the then Finance Minister Mr. Arun Jaitley stated that a comprehensive bankruptcy code in line with international best practices and providing the requisite judicial capability, will be implemented41. As a result, the government set up the Bankruptcy Law Reform Committee (“BLRC”) in August 2014, which submitted its report to the Finance Ministry on November 4, 201542. The Committee was set up with the aim of reducing the duration of the insolvency process, reducing losses in the recovery process, and increasing debt financing across all instruments. The Committee took note of the little leverage that creditors have in the event of debtor default. The average amount of debt they were able to collect was just 20%, which meant that only the largest enterprises would receive financing43. Furthermore, the Committee noted that the creditors ought to be able to make commercial choices as to the future of the insolvent company. The evolution of insolvency rules in India thus became a collaborative effort of the country’s legislative, executive, and judicial branches.
Volume 2 of the BLRC’s report proposed the Insolvency and Bankruptcy Bill which became a road map for dealing with personal and corporate insolvency. At the time, only secured financial creditors could apply against the default of a debtor to initiate the insolvency process44. The BLRC recommended that, depending upon the context, either the debtor or the creditors ought to be able to apply for the commencement of the insolvency procedure. Additionally, the BLRC also recommended that operational creditors such as workers whose paychecks were overdue ought to be able to commence insolvency resolution proceedings (“IRP”) against the debtor company45. Further, the committee recommended that a certified insolvency practitioner oversee the whole IRP. For the duration of the IRP, the expert should have charge of the debtor’s assets and manage them in a way that keeps them safe while discussions with regard to the financial future of the company continue. Additionally, to address the ‘need for speed” in the insolvency process, the committee recommended that creditors and debtors must negotiate under strict time limits to reach a swift bankruptcy settlement46. As a result, the committee suggested that the IRP ought to be completed within 180 days. The BLRC also suggested that this deadline be extended by upto 90 days for exogenous situations, provided that 75% of the creditors agreed47.
UNCITRAL
The push for establishing uniform principles of insolvency law globally can be recognised as an aftermath of the Great Depression, which forced an abundance of banks into insolvency.48 Further, with the development of globalization and the free flow of commercial trade worldwide, there was a dire need to consolidate a legislation based upon international standards. The UNCITRAL adopted the Legislative Guide on Insolvency Law in 2004 to provide far-reaching objectives aimed at assisting in insolvency law reform in countries across the world.49 The IBC, keeping the key features of the Legislative Guide on Insolvency Law, inculcated provisions to implement the promotion of economic stability and growth; a separate judicial forum to avoid the plethora of cases plaguing the Indian courts, and most significantly focus on balancing between the rights of the creditors and the rehabilitation of the debtor.50
This section presented the development of the extant insolvency framework in India. The next section moves on to describes the problem statement which concerns homebuyers or allottees. This description is supported through case law and the amendments to the IBC in 2018 and 2020. Analysing the jurisprudence developed by courts and various amendments to the IBC, the next chapter discusses the current position of allotees as limited or unsecured financial creditors. Further, using these resources we analyse the challenges faced by the Adjudicating Authority and stakeholders in dealing with the insolvency of real estate enterprises.
III. THE RISE OF THE HOMEBUYER
In 2017, the NCLT and the NCLAT had one of their first opportunities to examine the position of allottees as creditors within the IBC framework in a number of cases. In Nikhil Mehta v. AMR Infrastructure, the NCLT held that homebuyers are not financial creditors as there is no consideration for the time value of money and that these are simple sale transactions51. However, the NCLAT took an opposite view holding that the amounts invested by the homebuyers were not mere sale transactions, but would indeed come under the ambit of financial debts under section 5(8) of the IBC52. The NCLAT held that allottees are indeed, financial creditors.
In Anil Mahindro & Anr vs. Earth Iconic Infrastructure (P) Ltd, reliance was placed on Nikhil Mehta v. AMR Infrastructure to the same end and effect53. The sum of these decisions was that an allottee was neither an operational creditor nor a financial creditor unless an allottee was assured returns, in which case, it would be a financial creditor. This caused much confusion about the status of home buyers under the Code54. Thus, an allottee was held to not have the right to initiate an insolvency process unless an allottee was assured returns in terms of allotment55. It could only file claim under the category of ‘other creditors’. IBBI amended the regulations in the year 2017 to introduce a special form (Form CA) in which claim could be filed by an allottee56. In 2018, the Insolvency Law Committee noted that disbursements of funds by potential homebuyers were typically made against the delivery of a future asset, namely the residence. Upon failure of the project, money is repaid, based on the time value of money57. This further cemented the position of the homebuyer as a financial creditor.
This status further gave homebuyers the right to approach the NCLT and NCLAT for the resolution of their disputes and to initiate proceedings against bankrupt debtors. Consequently, this also meant that when recovering dues from insolvent real estate firms, homebuyers would also get a seat at the Committee of Creditors (“CoC”)58. A seat at the CoC meant that the homebuyers do have a voice while deciding the outcome of real estate corporate debtors under insolvency59. This new status also gives homebuyers access to financial statements and information of the debtor which are not readily available to the general public or operational creditors60.
The 2018 Amendment to the IBC
Following the recommendations of the Insolvency Law Committee in 201861, the rise of the allottee as a creditor was further codified with the Insolvency and Bankruptcy (Amendment) Ordinance, 201862 and later, in the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (the “2018 Amendment”). Prior to this amendment, allottees had no status of either a financial creditor63 or of an operational creditor64 within the IBC – this status was granted through caselaw, but not codified under the IBC. The 2018 Amendment also provides that the finances of real estate allottees directed towards the failed real estate project would have the same commercial effect as that of a debt65. The statements made by the Supreme Court in Jaypee Orchard Resident Welfare Society v. Union of India66 that they will endeavour to do all in its power to safeguard the interests of the homebuyers is notably encouraging. In Chitra Sharma v Union of India, the Supreme Court protected the interests of home buyers in projects floated by Jaypee Infratech Limited and directed the Committee of Creditors to be constituted afresh in accordance with the provisions of the Insolvency and Bankruptcy (Amendment) Ordinance, 2018, more particularly the amended definition of the expression “financial creditors”67. However, in Ajay Walia v Sunworld Residency Private Limited, courts took the view that a homebuyer who had subrogated its rights in favour of a bank could not take the additional advantage of a financial creditor68.
The constitutional validity of the classification of financial and operational creditors was upheld in the now seminal case of Swiss Ribbons v. Union of India69. The Supreme Court in this case held that the repayment of financial debts infused capital into the economy as banks and financial institutions were able, with money that had been paid back, to further lend such money to other entrepreneurs for their businesses. This rationale created an intelligible differentia between financial debts and operational debts, which were unsecured. The constitutional validity of the inclusion of allottees as financial creditors was discussed and challenged in Pioneer Land Infra v. Union of India70 on the grounds of it being violative of Article 14 and Article 19(1)(g) read with Article 19(6) of the Constitution of India. The Supreme Court rejected the challenges and upheld the 2018 Amendment Act’s constitutionality. The Supreme Court observed, based on a reading and interpretation of Section 5(8)(f) of the IBC, that homebuyers/allottees were included in the main provision, Section 5(8)(f), from the beginning of the Code, with the Explanation being added in 2018 merely to clarify doubts about the status of homebuyers. The Supreme Court further held that interests of allottees in the insolvency of a real estate company must be protected.
This was also upheld in the recent judgment of Yadubir Singh Sajwan v. Ms. Som Resorts71 where the NCLT was of the view that homebuyers are those who are genuinely interested in taking possession of the housing units, and the principal amount paid by them to the real estate developer is a financial debt. Hence, the NCLT concluded that homebuyers are indeed, financial creditors.
In Bikram Chaterji v. Union of India72, the Supreme Court noted that “if the real estate business has to survive in India, it has to be answerable to the public and has necessarily to uphold the trust reposed in builders/promoters”73. The court went on to establish the status of homebuyers in housing projects vis-à-vis lenders and government authorities. The apex court was of the view that in a real estate project fraught with financial issues, the status of homebuyers was paramount. The Court decided this case with the rationale that for a homebuyer to purchase a house, a major proportion of their life saving are invested with their real estate firm defaulting in their projects generally leads homebuyers to lose this large amount of their life savings which often gets stuck for years.
Around the same time, in Flat Buyers Association v. Umang Realtech Pvt. Ltd74 the NCLAT introduced a novel concept of a reverse corporate insolvency resolution process which allowed the real estate corporate debtor to continue its construction activities in the face of an application under Section 7 of the IBC. This was done “in the interest of the allottees and survival of the real estate companies and to ensure completion of projects which provides employment to large number of unorganized workmen”. The NCLAT in Umang Realtech also provided for the segregation of projects being developed by the same corporate debtor while holding that a corporate insolvency resolution process (“CIRP”) against one project should not affect the others. It was found that individual allottees were filing insolvency petitions based on individual grievances and disputes rather than for the resolution of the corporate debtor. The challenge in using the usual CIRP route is that although allottees have been awarded the status of financial creditors, being unsecured financial creditors, they have limited voting rights and do not possess the expertise to assess the long term sustainability of the Corporate Debtor. This leads to two unfortunate consequences for allottees. Since allottees would usually be in favour of delivery of their property over return of monies invested, this would not be possible if the Corporate Debtor goes in liquidation, nor if the CoC reaches a conclusion75. Even if the Corporate Debtor goes into liquidation, allottees’ rights to distributable funds are still severely impacted as unsecured creditors.
The 2020 Amendment to the IBC
The Insolvency and Bankruptcy Code (Amendment) Act, 2020 (“2020 Amendment Act“) was incorporated to balance the scales. The 2020 Amendment Act provided that a CIRP against the real estate corporate debtor can be initiated only jointly, by not less than one hundred of such
allottees under the same real estate project or not less than ten percent of the total number of such allottees under the same real estate project, whichever happens to be less76. Further, as per the Amendment, matters already filed by individual Homebuyers but not yet admitted by the adjudicating authority prior to the commencement of the 2020 Amendment Act will be dismissed if they are not modified to meet the above-mentioned minimum threshold requirement within 30 days of the commencement of the 2020 Amendment Act.
In the case of Manish Kumar v. Union of India77, the Supreme Court upheld the constitutional validity of the 2020 Amendment Act. However, in the case of Puneet Kaur v. K V Developers Private Limited78, the NCLAT ruled that even claims of Homebuyers who did not file claims should be included in the information memorandum if they were reflected in the corporate debtor’s record. The NCLAT determined that ignoring such claims would result in inequitable and unfair resolution. The Appellate Tribunal also mentioned the complexity Homebuyers had to face in filing their claims. It was discovered that the public announcement inviting claims is usually made in the area where the corporate debtor has its registered office and corporate office, and there is a good chance that all of the Homebuyers, who are usually hundreds in number, are unaware of the CIRP and do not file their claims within the time limit. As a result, the NCLAT observed that failure to submit claims within the prescribed time frame is a common characteristic in the insolvency process of almost all real estate projects. The Appellate Tribunal went on to rule that once the allotment letters have been issued to the Homebuyers and payments have been received, the real estate company is obligated to provide possession of the houses, as well as other associated liabilities. Hence, homebuyers have every right to contest their claim.
As a result, the present position on the status of allotees within the IBC framework is that of an unsecured financial creditor capable of commencing a CIRP against a real estate corporate debtor as long as that action is collective. However, as some authors note, this now places homebuyers, insofar as initiation of insolvency applications is concerned, behind even ordinary operational creditors, who can initiate an insolvency application for any default above INR 10 million79.
However, even prior to the enactment of the IBC and its amendments as well as various case law protecting them, homebuyers’ rights were safeguarded under the Real Estate (Regulation and Development) Act, 2016. If we are to derive a harmonious interpretation of homebuyers’ rights as consumers under the RERA as well as stakeholders under the IBC, we must engage with the provisions under RERA, which we do in the next section.
IV. HOMEBUYERS RIGHTS UNDER THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016
Background and need for the RERA
Taking advantage of the rising demand for housing in India, private real estate developers had ostensibly taken over the real estate sector with no concern for the consumers80. A need for regulating the burgeoning real estate sector had come into sharp focus in the matter of Belaire Owner’s Association v DLF Limited and Ors81. The Competition Commission of India held that DLF, a major real estate development company, was abusing its dominant position owing to several unfair and onerous conditions in its builder buyer agreement, allowing DLF to make unilateral changes in construction plans and schedules and absolute discretion to change clauses without the consent of allottees82. The Commission taking into account all the instances of abuse imposed a penalty on DLF at the rate of seven percent of the average turnover for the last three preceding financial years, amounting to approximately INR 6.3 billion. This decree was upheld by the Competition Commission Appellate Tribunal83 as well as the Supreme Court of India84. One of the direct results of Belaire was the promulgation of the Real Estate Regulation and Development Act, 2016. While the RERA was widely met with approval85, there was considerable resistance from the real estate industry itself and quite understandably so86.
Salient Features of RERA
The RERA establishes a Real Estate Regulatory Authority in each state87. Real Estate Regulatory Authorities are government agencies charged with the responsibility of regulating real estate development activities and to maintain transparency in the sector. It is further responsible for keeping a record of development activities by conducting inquiries and directing the roles of promoters, allottees and real estate agents. The Real Estate Regulatory Authority, along with the Central Advisory Council is also expected to advise the government on policy matters governing the real estate sector88. Real Estate Regulatory Authorities may issue directions for the implementation or impose penalties and fines for the non-compliance of the provisions of the RERA89. An appeal against an order of a Real Estate Regulatory Authority lies to the Real Estate Regulatory Tribunal90.
Companies engaged in real estate development projects, also known as ‘promoters’91, are required to register themselves before the Real Estate Regulatory Authority having jurisdiction over the location where the project is to be constructed92. Details of the project, including delays in the completion of other projects promoted by the applicant93 and the time period within which the project is to be completed94 must be provided. Upon registration, details of the project, including the site and layout plan, and schedule for completion of the real estate project must be provided to the Real Estate Regulatory Authority for further dissemination to the public95.
Real estate promoters take on the primary responsibility of completion of the real estate project and are subject to a number of obligations under the RERA including reducing information asymmetry96, entering into an agreement for sale with proposed allottees97, adhering to the sanctioned specifications98. The promoter is further charged with the duty to repair and rectify any structural defects in the construction within a period of two years from the date on which the allottee was granted possession99.
The RERA was created to ensure greater accountability towards consumers, and significantly reduce frauds, arrest delays and high transaction costs associated with real estate development100. It attempts to balance the interests of consumers and promoters by imposing certain responsibilities on both. It seeks to establish symmetry of information between the promoter and purchaser, transparency of contractual conditions, set minimum standards of accountability and a fast track dispute resolution mechanism101.
Rights of Allottees under the RERA
The RERA provides for a number of rights of allottees, which may be grouped generally under information rights102, rights to title103, insurance104, right to prevent transfer to a third party105, pecuniary rights106, etc. However, any legal proceedings that may be commenced before the NCLT under the IBC, must necessarily involve a debt. That is, an amount that is required to be paid by the promoter as the corporate debtor to the allottee as the financial creditor. We must therefore, examine the conditions under which such a debt may be created.
Dues that are payable by real estate promoters to allottees may fall into two categories, viz. return of sums advanced, along with interest, and compensation. Allottees, having advanced any sums towards the allotment, sale or transfer of a plot, apartment or building107, may choose to withdraw from the project under two circumstances. Firstly, if the allottee suffers any losses or damage due to false or incorrect statements made in an advertisement or prospectus promoting a real estate project108. Secondly, if the promoter has not been able to deliver the apartment, plot or building within the timeframe declared at the time of registration109. Under Section 18 of RERA, allottees of delayed projects may elect to either withdraw from the project, which leads to the return of the sums advanced, along with interest, or to continue with the project, in which case allottees are entitled to compensation for delayed transfer of possession.
Allottees are also entitled to compensation in case of structural defects and faults in the project110, any loss caused to him due to defective title of the land on which the project is being developed111 or the failure on part of the promoter to discharge its obligations under the RERA.
Therefore, we note that there are several instances where a debt may accrue on part of the promoter as the corporate debtor in favour of the allottee. Non-payment of such debt would amount to a default112 under the IBC and has been noted earlier, this would create a cause of action for homebuyers to approach the NCLT, post the 2020 Amendment, albeit as unsecured creditors.
However, we believe that a cogent argument may be made to show that the status of homebuyers may still be elevated to secured financial creditors. That, while homebuyers have a seat at the CoC table, there remains a gap between other secured financial creditors and homebuyers. The next section seeks to bridge that gap
V. HOMEBUYERS AS SECURED CREDITORS
According to subsection 3(30) of the IBC, a secured creditor is a creditor in whose favour a security interest is created. A definition for “security interest” may be found in Code section 3(31). Mortgage, charge, hypothecation, assignment and encumbrance, as well as any other agreement or arrangement ensuring payment or performance of any obligation of any person, generate a security interest in favour of, or provide for, a secured creditor.
In any CIRP, stakeholders are bound to have conflicting priorities. In Swiss Ribbons, the Supreme Court upheld the interests of all stakeholders including workers, creditors and shareholders. In light of this judgment, arguments have been raised suggesting that the IBC takes a more inclusivist approach to insolvency resolution as compared to previous attempts113. According to the liquidation cascade outlined in Section 53 of the Code, all secured creditors shall be paid in proportion to their approved claims. Each secured creditor is free to pursue the enforcement of their security interest in accordance with the applicable law and opt out of the liquidation process, or to waive their security interest and participate in the liquidation proceedings, in which the corporate debtor’s assets are sold collectively114. In the case of real estate corporate debtors, homebuyers are likely to prioritize speedy delivery of their constructed apartments while the other financial creditors would prioritize maximization of debt recovery115.
The 2020 Amendment in the IBC brings an interesting bit of inspiration from the Companies Act, 2013 (“ICA”). Under the ICA, a minimum of one hundred members or members holding no less than ten percent of the voting rights in the company may institute an action for minority oppression and/ or mismanagement116 or for compensation117. We note a similar mechanism adopted under the 2020 Amendment which provides that a CIRP against the real estate corporate debtor can be initiated only jointly, by not less than one hundred of such allottees under the same real estate project or not less than ten percent of the total number of such allottees under the same real estate project, whichever happens to be less.
In order to derive an argument for homebuyers to be treated as secured creditors, we must first understand the nature of secured debt under the ICA.
Loan finance is a key source of capital for companies118. Financial Institutions like banks, while lending money to companies take securities over the assets of the company to ensure minimum exposure to the risk of non-repayment of loan119. Liens created against properties of the company for the purposes of securing loans, referred to in the ICA as charges, must be registered with the Registrar or Companies120
The Homebuyer – Real Estate Developer Relationship
While the contractual and statutory relationship between the homebuyer and the real estate developer has been described earlier in this paper and elsewhere, it may be prudent to capture the essence of the relationship here. The homebuyer and the real estate developer enter into what is commonly known as the builder buyer agreement121 – an agreement to sale a property to be created by the real estate developer against the timely payment of consideration by or on behalf of the homebuyer. This contractual relationship is subject to further statutory considerations as described in the previous chapter. As a result, the homebuyer provides consideration or a promise for consideration against the timely delivery of immoveable property. Thus, while the purpose of the builder buyer agreement is to deliver immoveable property to the homebuyer, we see how that purpose may be turned into a debt on part of the real estate developer by action of the RERA. We believe therefore, that this debt, backed by the delivery of immoveable property, is akin to a mortgage and therefore, takes on the garb of a mortgage.
A mortgage, defined under Indian law includes, amongst other things, a transfer of interest in identified immoveable property for the purpose of securing the payment of money advanced, a debt or the performance of an engagement which may give rise to a pecuniary liability122.
We have seen how, in previous sections, one of the critical identifying factors of a floating charge is that it becomes enforceable against a specific property only upon the happening of an event. It is true that the nature of the transaction between the homeowner and the real estate developer is that of sale of property. However, provisions in the RERA make it clear that upon events of default on part of the real-estate developer, this transaction of sale gives rise to a debt, which is then enforceable not just under the RERA123, but also the IBC124.
However, the basis of this debt is that the homeowner retains a legitimate expectation to either have their investment returned or having their home built. As a result, much like a secured financial creditor, the homeowner also has the right to claim property as part of the original sale transaction. As Khare suggests, while financial creditors would accord some urgency to the repayment of their debts, homeowners would prefer the delivery of their property125.
Recognising the motivations and preference of homeowners to receive property over repayment of debt, courts have examined a relatively novel concept of a Reverse CIRP. In Flat Buyers Association Winter Hills v. Umang Realtech Pvt Ltd126, the NCLAT was of the view that instead of following the usual route of inviting a resolution plan for the corporate debtor, the project in question would be handed over to an alternate real estate developer127 who would carry on the project instead of the corporate debtor. In effect, the other projects being developed by the corporate debtor would not be affected by the delays in one. The concept of Reverse CIRP, while absent in the IBC itself, shows that the judiciary is not averse to legal experimentation128, particularly in the case of a real estate corporate debtor. Reverse CIRPs have been met with mixed reactions, with proponents lauding it as “what is needed to achieve the harmony between stakeholders”129 and opponents suggesting that the NCLAT exceeded their jurisdiction, amongst other issues under the IBC130. Irrespective of whether Reverse CIRPs will be used in the future as well131, one may argue that the Reverse CIRP process might be misused by homeowners as an arm twisting tactic against delayed possession of apartments.
The Rise of the Mortgage
At this stage, it may be prudent to revisit our understanding of how security interests are created under property law. A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability132. As noted by the Law Commission of India, this section creates three essential characteristics of a mortgage. Firstly, that there must be a transfer of interest. Second, that interest must be in specific immoveable property; and lastly, the transfer must secure the payment of a loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability133.
There can be no doubt that an interest in specific immoveable property is created the moment the builder buyer agreement is entered into. At that point of time, the homebuyer has a contractual right to receive a specific unit in the real estate project. Upon the delay of handing over possession, a statutory debt is created under the RERA. This non-performance of the real estate developer gives rise to a pecuniary liability. Consequently, the allottee can either be delivered possession of the property or have their investment returned at the election of the allottee.
In Umang Realtech, the NCLAT established that “the ‘unsecured creditors’ have a right over the assets of the Corporate Debtor i.e. flats/ apartment, assets of the Company”134. As a result, an interest in property is created in favour of the homeowner as soon as the builder buyer agreement is executed. An interest in property against payment of money later convertible into a debt would automatically create a lien, an encumbrance or a charge against the debtor. Even if the property has not been clearly earmarked as part of the builder buyer agreement, or even if the property has not even been created, the homeowner’s primary claim would be to receive the property that it had paid for. This gives rise to a floating charge in favour of the homeowner.
Another approach to this argument would entail the conversion of the homebuyer’s agreement, which ostensibly is a document memorialising the sale of property. Upon a default on part of the real estate developer, this sale agreement converts to a claim of debt. This argument is supported by the fact that homeowners have the right to claim their money back as a debt under the RERA and the IBC. The basis of that debt is the existence of the sale agreement. It may be argued that while the intention of the parties was to enter into a contract of sale, by operation of law, this contract of sale converts to a claim of debt with a legitimate interest and expectation to receive property.
Consequently, an argument may be made that the homeowner does have a secured debt, with the underlying property in which the homeowner has an interest, which bring the homeowner at par with other financial creditors.
An unsecured creditor’s claim for repayment is immensely dependent on his personal contractual rights135. A contract’s aggrieved party often has just one option for redress: a demand for damages136. Action on the debt will be accessible when the claim is for a liquidated sum currently payable, and specific performance and injunctions may also be sought. Unsecured creditors have no rights to the debtor’s property while a lawsuit is still pending, and even after a decision has been obtained, the debtor’s assets cannot be seized or sold to satisfy the debt without a court order authorizing such enforcement137.
Post the Insolvency and Bankruptcy Code (Amendment) Act, 2018, homebuyers, despite being granted similar rights as secured financial creditors and with the amount owed to them being recognized as financial debt, are as of yet not considered secured financial creditors138. The Supreme Court in the Pioneer139 case clarified homebuyers to be unsecured creditors:
A floating charge debenture holder is in a distinct situation than the others. Once the charge has solidified into a fixed charge, the parties who hold such a charge have the legal right to make an application to the court for an order of sale of the property that is subject to the charge. The court will then decide whether or not to grant the order. The potential power to enforce security without first acquiring judgment for the sums owed and an order enforcing such judgment differentiates a charge from a claim that is based solely on a contract, and it is indicative of a proprietary claim140. This is true even though the floating charge remains dormant until it crystallizes141.
“54… True, allottees are unsecured creditors, but they have a vital interest in amounts that are advanced for completion of the project, maybe to the extent of 100% of the project being funded by them alone.”142
Section 11(4)(h) of RERA143 says that, initially, a mortgage cannot be put on a property for which the agreement has already been signed by a defaulting developer. Secondly, the proviso states that in case a situation arises where mortgage has been charged, it will not be allowed to tamper with the rights and interests of the respective homebuyers.
The provisions of RERA and Section 3 (31) of the IBC144 show that homebuyers may be protected as secured financial creditors. However, this interpretation has not yet been judicially identified and hence there remains ambiguity around it. As per the Resolution Process, in order to claim dues and exercise the right to a seat in the committee of creditors, it is necessary to be a financial creditor145. As unsecured financial creditors, there could be ambiguity related to the homebuyer’s interests in the assets of the company and consequent claims over distributable proceedings. If the resolution applicant is giving a certain value to the assets of the company while taking over the company as a going concern, the first claim over the assets would fall to the secured creditors, not homebuyers as unsecured creditors146. Unless the homebuyer manages to fall into the majority of 66% or get a blocking vote of 33% or more, the chances of them getting a priority in distribution of assets over secured financial creditors are next to nothing147.
VI. CONCLUSION
One of the key objectives of insolvency proceedings is the principle of pari passu which recommends similarly placed creditors in an insolvency proceeding to be treated equally148. However, in an insolvency proceeding, all movable property of the corporate debtor is sold to cover the claims. In such cases the remaining funds of the company may not be enough to cover the claims of the unsecured creditors of the company149.
The intention of the law while introducing the 2020 amendment to the IBC was to bring the homebuyers at par with other financial creditors in order for the homebuyers to get a say in approving the resolution150. However, even after the 2020 amendment, homebuyers still do not have a seat at the CoC table equal to that of financial creditors as they remain unsecured creditors. Given that the property created for the very apartments that are built for the usage and purpose of homebuyers, it remains a legal absurdity to say that homeowners have no security in those very properties
*The authors are Assistant Research Associate – Insolvency Law Academy and Professor at the Jindal Global Law School, O.P. Jindal Global University respectively. An initial draft of this paper was presented at the 2nd International Research Conference on Insolvency and Bankruptcy, organised by Indian Institute of Management Bangalore (IIMB) & Insolvency and Bankruptcy Board of India (IBBI) on 23rd – 25th February 2023, where it won the Best Paper Award (Law).
CITATIONS
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High Level Committee, Law Relating To Insolvency And Winding Up Of Companies (2000) para 6.1 (Eradi Comittee)
Sumant Batra, ‘Proposals for Reforms – The Indian Position’, (The Second Forum for Asian Insolvency Reform, 2002).
The Sick Industrial Companies (Special Provisions) Act, 1985 was enacted in 1985 and was officially notified in 1987.
The T. Tiwari Committee was set up by the RBI on May 14, 1981 and chaired by Shri T. Tiwari, Chairman, Industrial Reconstruction Corporation of India, Calcutta.
Sumant Batra, Corporate Insolvency: Law and Practice (EBC, 2017)
Batra, ‘Proposals for Reforms – The Indian Position’ (n.3) 10.
The Committee on Industrial Sickness and Corporate Restructuring was set up by the Union Finance Minister Dr. Manmohan Singh on May 27, 1993, and was chaired by Dr Omkar Goswami, Indian Statistical Institute, Delhi. The Committee submitted its report on July 13, 1993.
Report of The Committee on Industrial Sickness and Corporate Restructuring (1993)
Sumant Batra, “Asian Recovery: Progress and Pitfalls, the Position of India”, The World Bank Guild<http://siteresources.worldbank.org/GILD/ConferenceMaterial/20157508/Batra%20=%20India-%20Final.pdf> as cited in Batra (n.1) 11.
Ibid
Ibid para 2.8
Press Information Beuro, Government of India on the Budget Speech for the year 2015–16 by Finance Minister Mr. Arun Jaitley <https://doe.gov.in/sites/default/files/FM_openingRemark_3year_MoF_achievements.pdf> last accessed August 30, 2022.
Report of the Bankruptcy Law Reform Committee (Vol1 2015) (BLRC)
Ibid
Ibid
BLRC (n.16)
Ibid
BLRC (n.16) para 5.4
Batra, Corporate Insolvency: Law and Practice (n.1)
“Uncitral Legislative Guide on Insolvency Law Commission on International Trade Law” (United Nations) <https://uncitral.un.org/en/texts/insolvency/legislativeguides/insolvency_law> accessed August 30, 2022
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IB-02(PB)/ 2017 available at <https://ibbi.gov.in/webadmin/pdf/order/2018/Sep/28th%20Sept%202018%20in%20the%20matter%20of%20A MR%20Infrastucture%20Ltd.%20CA%20No.%20811-(PB)-2018%20in%20(IB)-02-(PB)-2017_2018-09- 28%2018:35:02.pdf>
[2017] 137 CLA 163 (NCLT)
Company Appeal (AT) (Insolvency) No. 74 of 2017
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Company Appeal (AT) (Insolvency) No. 8 of 2017
As per Regulation 8A of Insolvency and Bankruptcy Code, 2016; Home Buyers are “Class of Creditors as Financial Creditors. Any person claiming to be a creditor in a class is to submit claim with proof to the interim resolution professional under FORM CA.
Insolvency Law Committee, Report of the Insolvency Law Committee, available at <http://www.mca.gov.in/Ministry/pdf/ILRReport2603_03042018.pdf>
Section 21(2) of the IBC provides for the committee of creditors to comprise of all financial creditors of the debtor company
Section 30 (4) of the IBC enables the committee of creditors to approve a proposed insolvency resolution plan with a three-fourths majority
Answerable to the committee of creditors under Section 27 of the IBC, the insolvency resolution professional is required to provide all manner of information regarding the corporate debtor to the committee (Section 25 (2)), prepare an information memorandum (Section 29) and seek the approval of the committee on certain actions not in the ordinary course of business (Section 28)
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Section 5(21) of the IBC
Explanation to Section 3 of the 2018 Amendment
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(2018) 18 SCC 575
CP (IB) 11/ALD/2018. Decision date- 30.07.2018
(2019) 4 SCC 17
(2019) 8 SCC 416
Yadubir Singh Sajwan & Ors. v Som Resorts Private Limited, Company Petition No. (IB)-67(ND)/2022
2019 SCC OnLine SC 901
(2018) 17 SCC 691
Company Appeal (AT) (Insolvency) No. 926 of 2019, available at
<https://nclat.nic.in/Useradmin/upload/18011332575e3d0b157e29a.pdf>Dr. Binoy J. Kattadiyil, ‘Moving Forward With Reverse CIRPs: Dissecting Flat Buyers Association Vs Umang Realtech’ (2020), International Journal Of Multidisciplinary Educational Research, Vol 9, Issue 5(8).
Insolvency and Bankruptcy (Amendment) Act, 2020
2021 SCC OnLine SC 30.
Company Appeal (AT) (Insolvency) No. 390 of 2022.
Khare, Uday, Insolvency in Real Estate: A Difficult Balancing Act (September 01, 2021). JGILS Working Paper No. 3 / 2021, available at <https://ssrn.com/abstract=3911840>
30th Report of the Standing Committee on Urban Development, Ministry of Housing and Urban Poverty Alleviation, Government of India, February 2014, p 8.
2011 CompLR 0239 (CCI), p 52.
Shoaib, ‘The Penalty on DLF by CCI will effect the real estate sector’ (24 August 2011) Good Returns, available at: <http://www.goodreturns.in/news/2011/08/24/cci-order-against-dlf-impact-realty-sector.html> (accessed on 8 November 2014).
DLF Limited v Competition Commission of India, Competition Appellate Tribunal, Appeal No. 20 of 2011 2014 CompLR 1 (CompAT), available at <http://compat.nic.in/upload/PDFs/mayordersApp2014/19_05_14.pdf> (accessed on 10 November 2014).
DLF Limited v Competition Commission of India, Interim Application (for stay) No. 1 of 2014 in Civil Appeal No. 6328 of 2014, order dated 27 August 2014, available at: <http://courtnic.nic.in/supremecourt/temp/ac%20632814p.txt> (accessed on 10 November 2014); See also DLF Limited v Competition Commission of India 2014 (10) SCALE 417.
‘Real Estate Regulation Bill to draw fair industry practices, accountability’ (19 September 2013) Bangalore Business Standard, available at: <http://www.business-standard.com/article/economy-policy/real-estate- regulation-bill-to-draw-fair-industry-practices-accountability-113091901135_1.html> (accessed on 8 November 2014).
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Section 20, RERA
Section 42, RERA
Sections 33-40, RERA
Section 43, RERA
Promoters take on the primary responsibility for real estate development and include real estate development companies, development authorities, State level co-operative housing finance societies, primary co-operative housing societies under Section 2 (zk)
Section 3, RERA
Section 4(2)(b), RERA
Section 4(2)(l)(C), RERA
Each Real Estate Regulatory Authority maintains a website wherein registered real estate project developers may create individual web pages for their projects under Section 5, RERA
Section 12 of the RERA requires that the promoter compensate allottees in case of loss or damage caused by incorrect information in advertisements and the prospectus of the real estate project.
Section 13, RERA allows promoters to receive upto ten percent of the cost of the apartment, plot or building without having to enter into an agreement for sale
Section 14, RERA
Section 14(3), RERA
Statement of Objects and Reasons, RERA
30th Report of the Standing Committee on Urban Development, Ministry of Housing and Urban Poverty Alleviation, Government of India, February 2014, p 9.
Section 12, RERA
Section 17, RERA
Section 16, RERA
Section 15, RERA
Section 18, RERA
Refer Section 2(d), RERA
Section 12, RERA
Section 18, RERA
Section 14(3), RERA
Section 18(2), RERA
Section 2(12), IBC
Akshaya Kamalnath and Aparajita Kaul, “Adding Mediation to India’s Corporate Resolution Process”, International Insolvency Review 2022;31:163–182
Technology Development Board vs Mr. Anil Goel & Ors. I.A No. 514 of 2019 in CP(IB) No. 04 of 2017
Khare, Uday, Insolvency in Real Estate: A Difficult Balancing Act (September 01, 2021). JGILS Working Paper No. 3 / 2021, Available at <https://ssrn.com/abstract=3911840>
Section 242 of the Indian Companies Act allows for directive or injunctive relief to be granted by the NCLT
Section 245 of the Indian Companies Act allows for compensation to be granted by the NCLT. See Arjya B. Majumdar & Sneha Bhawnani, Class Action Suits- Genesis, Analysis and Comparison, RGNUL BOOK SERIES ON CORP. L. & CORP. AFF. (2016) at 7-8 (available at <https://papers.ssrn.com/sol3/papers.cfm?abstractid=2883976)>.
Eilís Ferran, ‘Floating Charges, The Nature of the Security’ (1988), Vol. 47, No. 2 (Jul., 1988), The Cambridge Law Journal, <https://www.jstor.org/stable/4507164>, accessed 18 November 2022, p. 213
Ibid
Section 77, ICA
M/s. Imperia Structures Ltd. Vs. Anil Patni, Civil Appeal No. 3581-3590 Of 2020
Section 59, Indian Transfer of Property Act, 1882.
Sections 12 and 18 of the RERA
Post the 2020 Amendment
Khare, Uday, Insolvency in Real Estate: A Difficult Balancing Act (September 01, 2021). JGILS Working Paper No. 3/2021, Available at SSRN: <http://ssrn.com/abstract=3911840 or http://dx.doi.org/10.2139/ssrn.3911840>
Company Appeal (AT) (Insolvency) No. 926 of 2019
In this case, Uppal Housing Pvt Ltd, acting as a Promoter/ Intervenor, “agreed to remain outside the Corporate Insolvency Resolution Process but intended to play role of a Lender (Financial Creditor) to ensure that the Corporate Insolvency Resolution Process reaches success and the allottees take possession of their flats/apartments during the Corporate Insolvency Resolution Process without any third party intervention”
Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. (2019 SCC Online SC 1478) read with Swiss Ribbons Pvt Ltd v Union of India (2019) 4 SCC 17
Dr. Binoy J. Kattadiyil, ‘Moving Forward With Reverse CIRPs: Dissecting Flat Buyers Association Vs Umang Realtech’ (2020), International Journal Of Multidisciplinary Educational Research, Vol 9, Issue 5(8).
Sanjeev Kumar and Anshul Sehgal, ‘Reverse CIRP: An Alien Concept to the IBC Regime’, available at <https://www.barandbench.com/columns/reverse-cirp-an-alien-concept-to-the-ibc-regime>
Ram Kishor Arora Suspended Director of M/s. Supertech Ltd v Union Bank of India Company Appeal (AT) (Insolvency) No. 406 of 2022
Section 58(a) Transfer of Property Act, 1882
Law Commission of India, Seventieth Report on The Transfer of Property Act, 1882, August 1977, page 389, available at <https://lawcommissionofindia.nic.in/cat_Transfer_of_property_Act/>
Company Appeal (AT) (Insolvency) No. 926 of 2019
Eilís Ferran, ‘Floating Charges, The Nature of the Security’ (1988), Vol. 47, No. 2 (Jul., 1988), The Cambridge Law Journal, <https://www.jstor.org/stable/4507164>, accessed 18 November 2022, p. 215
Ibid, Hadley v. Baxendale (1854) 9 Exch. 341
Ibid, p. 216
Report of the Insolvency Law Committee 2018 available at <https://ibbi.gov.in/uploads/resources/ILRReport2603_03042018.pdf>
(2019) 8 SCC 416
23 Tennant v. Trenchard (1869) L.R. 4 Ch.App. 537 at 542 per Lord Hatherley L.C. in Eilís Ferran, ‘Floating Charges, The Nature of the Security’ (1988), Vol. 47, No. 2 (Jul., 1988), The Cambridge Law Journal, <https://www.jstor.org/stable/4507164>
Ministry of Corporate Affairs, “Registration Of Charges” (ICSI) <https://icsi.edu/> accessed November 20, 2022
Ibid
Section 11(4)(h) of RERA … “(h) after he executes an agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be”
Section 3 (31) of the Insolvency and Bankruptcy Code, 2016, “(31) “security interest” means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person…”
Standard Chartered Bank, London v. Khubchandani Hospitals Private Limited, Company Appeal (AT) (Insolvency) No. 911 of 2021
Banikiran Pattanayak , “Are Homebuyers Secured Financial Creditors” 2018, Insolvency and Bankruptcy Board of India – Ibbi <https://www.ibbi.gov.in/> accessed November 20, 2022
Report of the Insolvency Law Committee 2018 available at <https://ibbi.gov.in/uploads/resources/ILRReport2603_03042018.pdf>
World Bank. Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. 2001, p. 76. Available at <http://www.worldbank.org/ifa/ipg_eng.pdf>
Mohanty D, “Security Interests over Moveable Assets – Charges, Mortgages, Indemnities India” (Security Interests Over Moveable Assets – Charges, Mortgages, Indemnities – India November 6, 2017)
<https://www.mondaq.com/india/charges-mortgages-indemnities/643202/security-interests-over-moveable- assets> accessed November 20, 2022
- Ibid
Preamble, IBC
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 [7 of 2017]; The Insolvency and Bankruptcy Code (Amendment) Act, 2017 [Act 8 of 2018]; The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 [6 of 2018]; The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 [Act 26 of 2018]; The Insolvency and Bankruptcy Code (Amendment) Act, 2019 [Act 26 of 2019]; The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 [16 of 2019]; The Insolvency and Bankruptcy Code (Amendment) Act, 2020 [1 of 2020]; The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 [9 of 2020]. These listed amendments are limited until 2020, till the time of writing of this article. See in Ghayur Alam, Abhinav Pradhan and Aqa Raza, ‘The Insolvency and Bankruptcy Code, 2016 Interpreted-Constructed by the Supreme Court of India’, (December 2019) 19-126 NLIU Journal of Business Laws, Volume 1.
Flat Buyers Association v. Umang Realtech Pvt. Ltd, Company Appeal (AT) (Insolvency) No. 926 of 2019, available at <https://nclat.nic.in/Useradmin/upload/18011332575e3d0b157e29a.pdf>
Ibid
