Homebuyers’ arsenal adds financial creditor status

By Aditya Vikram Dua and Satish Anand Sharma, SNG & Partners
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With the recent amendment in the Insolvency and Bankruptcy Code, 2016 (IBC), effective 6 June 2018, the status of homebuyers who are allottees of a real estate project is raised to financial creditors, enabling them to initiate the corporate insolvency resolution process (CIRP) against defaulting builders. Before this amendment, an allottee in a real estate project who wished to bring action against a defaulting builder had the following options:

Aditya DuaSenior associateSNG & Partners
Aditya Dua
Senior associate
SNG & Partners

• The allottee could approach a civil court and file a suit for an injunction, damages or refund of the amount paid and interest against the defaulting builder. The allottee could also initiate criminal action by filing a criminal complaint under provisions of the Indian Penal Code, 1860, for cheating and breach of contract.

• Under the Consumer Protection Act, 1986, homebuyers are regarded as consumers if the dwelling is purchased for their own use and not for any commercial purpose, which permits homebuyers to approach consumer forums to bring an action against the builder for deficiency in services under the agreement between the homebuyer and the builder.

• A homebuyer could approach Competition Commission of India against a builder taking undue advantage of its dominant position to the disadvantage of the homebuyer.

• Under section 31 of the Real Estate (Regulation and Development) Act, 2016, a homebuyer/allottee can file a complaint with the Real Estate Regulatory Authority where the builder makes false promises to the home purchaser and does not comply with its statutory obligations.

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SNG & Partners has offices in Delhi, Mumbai and Singapore. Aditya Vikram Dua is a senior associate. Satish Anand Sharma is a senior associate and a qualified insolvency professional.

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One Bazaar Lane, Bengali Market
New Delhi – 110001
India

Contact details:
Tel: +91 11 4358 2000
Fax: +91 11 4358 2033
Email: info@sngpartners.in
Website: www.sngpartners.in

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