Home Buyers File Plea In SC Challenging IBC Amendment

An ordinance passed by the central government which amended the Insolvency & Bankruptcy Code (IBC) 2016 has been challenged in the Supreme Court by home buyers.

They have demanded stay on operation of Section 3 of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 which seeks to amend Section 7 of the IBC.

The home buyers’ plea has contended that the ordinance is completely against the fundamental rights guaranteed to home buyers (financial creditors) under Article 14 and 21 of the Constitution of India.

The writ petition has been filed by 11 petitioners of 11 different projects being constructed by Pioneer Urban Land & Infrastructure, Emaar MGF Land, BPTP, Supertech, Ansals, among others.

The petitioners have stated that they are aggrieved by the inaction of real estate developers and the arbitrary approach adopted in promulgating the ordinance titled Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, according to advocate Aditya Parolia of PSP Legal, who represents the home buyers.

According to home buyers, the central government passed the ordinance with absolute discrimination by inserting a precondition that a minimum number of buyers of a particular housing project would be required to file an application against developers, to trigger off Section 7 of the IBC, which is not applicable to other financial creditors under IBC.

According to the home buyers' plea, the time period of 30 days as specified in Section 3 of the ordinance is impossible for any individual buyer to gather so many financial creditors of the same project to meet the requirement of minimum threshold.

The plea has pointed out that details of allottees (buyers) are never published on any website or public domain since it is impermissible under the law to publish such details in public domain as the same would result in violation of their Right to Privacy as guaranteed under Article 21 of the Constitution of India.

Also, Section 3 of the ordinance seems to violate Article 14 because the threshold of minimum of 10% or 100 of the total allottees (buyers) in a given housing project to file an application under Section 7 of the IBC is only applicable to buyers and not for any other financial creditors, the home buyers have stated in their petition.