Thursday 22 February 2024

Karnataka RERA Orders Possession Handover Despite Developer's Insolvency, Citing Supreme Court Ruling

Bangalore : In a move emboldening homebuyers, the Karnataka Real Estate Regulatory Authority (KRERA) on February 15, 2024 has directed a Bengaluru-based developer, Vikram Structures, to hand over possession of a commercial space to a buyer despite the company undergoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). This decision comes on the heels of a recent Supreme Court ruling clarifying that the IBC moratorium does not shield individuals associated with the company from legal action.

Vikram Structures had failed to deliver the promised commercial space to the buyer in 2015, despite receiving full payment. The buyer, unable to recover his investment, filed a complaint with KRERA. The developer attempted to stall the proceedings by citing a moratorium order obtained from the National Company Law Tribunal (NCLT) under the IBC.

However, KRERA, citing the Supreme Court's January 29th, 2024, ruling, stated that the moratorium only shields the company itself and not its directors or promoters. The court had clarified that individuals associated with companies undergoing insolvency can still be held accountable for their actions.

Further bolstering its stance, KRERA pointed out that the NCLT order granting the moratorium was issued in February 2022 and that the developer had not provided any updates on its continuation. As per the IBC, such moratoriums cannot be indefinite.

"This is a landmark decision for homebuyers who often face delays and challenges due to insolvency proceedings," said a KRERA spokesperson. "The Supreme Court's ruling and our order emphasize that individual accountability cannot be hidden behind the company's shield."

Suprime Court of India

This move by KRERA is expected to set a precedent for similar cases across the country. Legal experts believe it will deter developers from misusing the moratorium provision and encourage authorities to take decisive action despite ongoing insolvency processes.

Highlights and Reactions:

  • KRERA orders possession handover despite ongoing NCLT insolvency proceedings.
  • Decision based on Supreme Court ruling clarifying individual accountability.
  • "Move expected to empower homebuyers and deter misuse of moratorium.There are many housing projects diched by developers in Mumbai like Vijay Group Housing Ltds housing project at Neral Vijay Estate Vakas Village where almost 356 Home buyers are waiting for possession of their homes since last 8 years", said Mr. Chandrakant Dandekar 72, the chairman of their Home Buyers Association.

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