Home-Buyers Cannot Invoke Insolvency for RERA Monies

The National Company Law Appellate Tribunal (NCLAT) has ruled that home-buyers cannot drag realty companies through the insolvency process for recovering monies awarded to them by a real estate regulator. The NCLAT ruled that a home-buyer cannot be treated as a financial creditor when the real estate company is unable to honour a decree awarded by the State-level Real Estate Regulatory Authority (RERA). Home-buyers need to take recourse to the civil law to recover the money. Only a minimum of 100 buyers or 10 per cent of all home-buyers in a project (whichever is lower) can file for bankruptcy. This caveat of a minimum 100 home-buyers may prevent developers from being unfairly dragged into insolvency by just one or two individuals. On the flipside, it may affect genuine home-buyers in projects where the builder is delaying work. These home-buyers will have to form a group to file a case against the builder. This process may be long drawn and tedious.