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Home Buyers under IBC & Case Studies

Ever since the Jaypee and Amrapali cases, home buyers have been under the scanner. From orders of the Hon’ble Supreme Court to multiple amendments in the Insolvency and Bankruptcy  Code, measures have been taken to protect the interest of the home buyers. While earlier, the home buyers were treated as ‘other creditors’, that is, neither operational nor financial, with the landmark ruling in Chitra Sharma v. Union of India, there status as financial creditors was established – the same also found place in the Code by way of amendments in section 7 of the Code.

In this presentation, we discuss the provisions w.r.t. Home Buyers under the Code and a detailed case study of the Amrapali Case and Jaypee Infratech Case.

Home Buyers under IBC & Case Studies

IBC Passes Another Test of Constitutionality

SC upholds the IBC Amendment Act, 2020

-Megha Mittal

Ishika Basu 

(resolution@vinodkothari.com)

In view of the rising need to fill critical gaps in the corporate insolvency framework like last-mile funding and safeguarding the interests of resolution applicants, certain amendments were introduced by way of the Ordinance dated 28.12.2019[1], which were later on incorporated in the Insolvency Bankruptcy Code (Amendment) Act, 2020 (“Amendment Act”). The amendments inter-alia introduction of threshold for filing of application by Real-Estate Creditors, colloquially ‘Home-Buyers’ and section 32A for ablution of past offences of the corporate debtor, were made effective from 28.12.19 i.e. the date of Ordinance.

While the Ordinance introduced several amendments[2], clarificatory as well as in principles, apprehensions were raised against proviso to section 7 (1), that is, threshold for filing of application by Home-Buyers, the ablution provision introduced by way of section 32A, and clarification under section 11 dealing with the rights of a corporate debtor against another company. As such, various writ petitions were filed under Article 32 of the Constitution, alleging that the aforesaid amendments were in contravention of the fundamental rights viz.  Article 14 which deals with the equality before law and equal protection of law; Article 19(1)(g) deals with fundamental right to trade, occupation, and business; and Article 21 deals with the right to life and personal liberty.

Now, after a year of its effect, the Hon’ble Supreme Court vide it order dated 19.01.2021, in Manish Kumar V/s Union of India, upheld the constitutional validity of the third proviso to section 7(1) and section 32A, setting aside all apprehensions against their insertion.

In this article, the Authors analyses the order of the Hon’ble Supreme Court, with respect to the threshold on filing of application by real-estate creditors, and section 32A.

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