For many, the dream of owning a home is a significant financial endeavour. But being a homebuyer makes you a financial creditor? In this blog, we’ll understand the connection between homebuyers and financial creditor status, exploring the implications and roles they might play in the realm of financial dealings that is we will get to know Homebuyers as Financial Creditors.
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Meaning of Financial Creditor
In simple words, a financial creditor, as per the IBC, is basically someone who has loaned money to a company as per Insolvency and Bankruptcy Code (IBC), So, if you’ve given a loan or offered financial services to a business, you become a financial creditor under the IBC. When a company is going through financial difficulties, the IBC provides a roadmap to fix the situation. As a financial creditor, your job is to ensure that the resolution is fair and just for the company facing money problems.
Overview
“Vishal Chelani and others were involved in a recent legal case” v – verb Debashish Nanda is mentioned in the Civil Appeal No. text. In the year 2023, the Supreme Court of India made a ruling regarding the connection between the Insolvency and Bankruptcy Code, 2016 (IBC) and the Real Estate (Regulation and Development) Act, 2016 (RERA).
Factual Background
The complainants, home buyers, invested in a property owned by Bull and Buildtech Pvt. developed real estate project. LLC (developer). The developer faced delays and could not complete the project on time. Outraged, the home buyers approached the Uttar Pradesh Real Estate Regulatory Authority and were asked to return the money with interest. At the same time, MDS proceedings were initiated against the developer and a settlement plan was proposed.
However, the resolution plan raises a critical question: How to differentiate homebuyers who have applied for help under RERA from those who have not? This resulted in different terms and conditions, with homebuyers who did not avail RERA support enjoying 50 times better terms than those who did.
Since the complainants were dissatisfied with the resolution plan, they appealed to the National Company Law Tribunal (NCLT). NCLT rejected the application. On appeal, the National Company Law Appellate Tribunal also upheld the resolution plan and found it sound and free of interference. In this regard, the appellants appealed to the Supreme Court. So as home buyer meaning is a person who want to buy a residential property.
Issue
The matter being considered by the Supreme Court was whether there ought to be varying treatment for two groups of home buyers under the IBC. That is the difference between the treatments to homebuyers who took remedies under RERA and the second one who did not and whether the homebuyer who did not took RERA remedies be considered as financial creditor.
Legal Framework
To tackle this inquiry, the Supreme Court delved into the crucial provisions of the IBC. The importance of IBC provisions over other laws is further emphasized by Section 238 of the IBC.
The Supreme Court based their decision on the precedent set in the case of Natwar Agrawal (HUF) versus. Ms Sakash Developers & Builders Pvt. Ltd is a private company that specializes in real estate development and construction.
The above-mentioned case of Ltd. confirmed that an individual who was initially allocated a property in a real estate project, and later became a declaration holder under the Real Estate (Regulation and Development) Act (RERA), still fell under the category of a financial creditor among the group of home buyers. This individual would be subject to the specified threshold limit outlined in Section 7(1) second proviso of the Insolvency and Bankruptcy Code (IBC).
SC’s reasoning and judgement
So as people want to know the home buyers as financial creditor Supreme Court judgement, so court gave a judgement. The artificial distinction made in the resolution plan was dismissed by the Supreme Court, based on Section 5(8)(f) of the IBC. The statement claimed that even if the complainants pursued various solutions under the RERA, their identity as home buyers would remain unchanged.
The Supreme Court determined that it was unfair to distinguish a particular group solely because some members had chosen to retrieve their deposits with interest as instructed by the RERA, while others had not.
Significant Ruling
This is a significant ruling, in which the Supreme Court has guaranteed equal treatment for all home buyers under the Insolvency and Bankruptcy Code, regardless of which course of action they choose under the Real Estate Regulation and Development Act.
So yes, homebuyers are secured financial creditors; this is the supreme court judgement on home buyers. This choice not only supports the values of fairness and equal treatment but also confirms the dominance and prevailing impact of the IBC. This decision is set to have extensive consequences, establishing a model for upcoming legal situations that involve the convergence of real estate rules and bankruptcy legislation in India.
Final words
In conclusion, while the journey of a homebuyer is primarily about securing a residence, the legal nuances also bring them into the realm of financial dealings. So as Supreme Court classified Home Buyers as financial creditors, homebuyers use influence in financial scenarios, highlighting the importance of understanding these roles in the ever-evolving landscape of property ownership.
