Laws changes as the seasons

Amrapali and Insolvency - Part 1

• The three-year-old legislature pertaining to Insolvency has undergone lot of challenges / changes owing to the varied variety of cases that jurisdiction is being exposed to. Homebuyers have used all their might in urging the apex Court to reframe the laws for their greater rights and security . One such reportable case is of the Amrapali Group of builders wherein the homebuyers filed a writ petition with the honourable Supreme Court challenging the validity of the provisions of Insolvency Bankruptcy Code 2016. On the builder failing to repay the debts of a particular project, homebuyers approached the doors of the Supreme Court to protect the interest of all the homebuyers in all the other projects of the defaulting builder group. Let us now proceed with the sections that have been challenged by the homebuyers in the said case.
• The first section is with regards to distribution of assets i.e. section 53 of IBC where the plea of the home buyers is that this section does not treat home buyers and secured creditors at par. Their request was to treat the home buyers with financial creditors and they ought to be declared as secured creditors under the code .Also they  should be among the first claimants to be given the proceeds in the event of Company`s assets being sold.
• Followed by Section 53, they also want to take away the protection provided in section 14 for the Builders i.e. Moratorium which is in fact is of an advantage for the builders as it prohibits the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor(Builder) including execution of any decree ,order in any court law, tribunal , arbitration panel or any other authority. Hence proceedings against the builder before National Consumer Disputes Redressal Commission to enforce their paramount claim of either possession of flats or refund of sale consideration should not be denied by imposing a moratorium. Hence Section 14 should not be applied to the proceedings which are in the benefit of the Corporate Debtor.
• Further the overriding effect section 238 was also questioned as IBC prevails over any other law. This becomes as hindrance in the implementation of other laws and provides a rescue ground for the defaulters.
• Honourable SC has very recently pronounced part judgement cancelling RERA registration of Amrapali Group of Companies.
• As time moves forward, it will be very interesting to follow the lead and see whether justice to the home buyers is served and whether provisions of IBC are amended yet again for betterment of its stakeholders.