Friday 1 March 2024

What is the stand of supreme court of India about home buyers trapped in a stalled housing project which is going to file liquidation in NCLT

The Supreme Court of India has been actively involved in protecting the rights of homebuyers trapped in stalled housing projects, including those facing liquidation in the National Company Law Tribunal (NCLT). Here's a breakdown of their stance:

Protection of Homebuyer Rights:

  • Priority in Liquidation: The Supreme Court has recognized homebuyers as financial creditors under the Insolvency and Bankruptcy Code (IBC), granting them priority over other creditors in the liquidation process. This means they have a higher chance of recovering their invested amount.
  • Alternative Resolution Mechanisms: The Court has encouraged the use of alternative resolution mechanisms like completion of projects by alternate developers, setting up Special Purpose Vehicles (SPVs), or utilizing funds from the Special Window for Completion of Affordable and Mid-Income Housing (SWAMIH Fund).
  • Protection from Interest and Penal Costs: In some cases, the Court has directed builders to stop charging interest and penal costs on outstanding payments from homebuyers, recognizing their financial hardship due to the stalled project.

Stance on Liquidation:

  • Last Resort: While recognizing liquidation as a potential option, the Court prefers exploring alternative solutions that prioritize project completion and safeguarding homebuyer interests.
  • Formation of Resolution Committees: In some cases, the Court has ordered the formation of committees comprising representatives from homebuyers, lenders, and government authorities to oversee the liquidation process and ensure fair treatment of homebuyers.
  • Monitoring by High Courts: The Court has directed High Courts to monitor the liquidation process and intervene if necessary to protect the rights of homebuyers.

Important Judgments:

  • Jaypee Infratech: The Court directed the formation of a resolution committee to revive stalled projects and ensure completion or refund to homebuyers.
  • Amrapali Group: The Court ordered the NCLT to appoint a receiver to manage the assets and complete the stalled projects.
  • Supertech Ltd.: The Court directed the demolition of illegally constructed towers and ordered the builder to refund homebuyers with interest.

Current Scenario:

  • The government has implemented various measures like the SWAMIH Fund and the Real Estate (Regulation and Development) Act (RERA) to address the issue of stalled projects.
  • The Supreme Court continues to monitor the situation and provide necessary directions to ensure justice for homebuyers.

Overall, the Supreme Court's stance is clear: protect the rights of homebuyers trapped in stalled projects, even in the face of liquidation. They advocate for exploring alternative solutions before resorting to liquidation and ensure fair treatment of homebuyers throughout the process.

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