The Hon’ble Supreme Court of India on August 9, 2019 has upheld the constitutional validity of the amendment which granted the status of financial creditors to home buyers as per the provision specified under the explanation to section 5 (8) (f) of the Code inserted vide the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (“Amendment Act”). In addition to being financial creditors, they are also entitled to be represented in the Committee of Creditors by authorized representatives as per the provisions of Section 21(6A)(b) read with Section 25A of the Amendment Act.
In light of the above, key points from the judgement passed by the Hon’ble Supreme Court of India are enumerated herein below:
1.) Constitutional validity of the amendment under the Insolvency and Bankruptcy Code, 2016 (“Code”)
The Hon’ble Supreme Court of India upheld the validity of the Amendment Act to the Code and elucidated that the Code does not infringe Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution of India.
2.) Additional platform for home buyers to raise their grievances
The Supreme Court clarified that the Amendment Act to the Code provides an additional platform to home buyers and therefore the law prescribed under the Code (as amended by the Amendment Act) and RERA are to be read harmoniously. It was further clarified by the Hon’ble Supreme Court of India that only in the event of conflict between the two legislations, the Code will prevail over RERA. Therefore, the remedies that are available to the allottees of flats/apartments are concurrent remedies, such allottees of flats/apartments are in a position to avail remedies under the Consumer Protection Act, 1986, RERA and the Code.
3.) Section 5(8)(f) being a residuary provision
The Hon’ble Supreme Court of India held that Section 5 (8) (f) of the Amendment Act as it originally appeared in the Code is a residuary provision, which always subsumed within it the provision for the allottees of flats/apartments. It was further held that the explanation added in the year 2018 vide the Amendment Act was only a clarification of this already stated position provided in Section 5 (8) (f) of the Code.