Insolvency and Bankruptcy Code (Code) and the Real Estate (Regulation and Development) Act seem to be pitted against each other when it comes to resolving interest of bankers and homebuyers, an Assocham report observed.
“The conflict between IBC and RERA came to the fore in quite a few bankruptcy proceeding in the recent times.... In a way, IBC and RERA have areas where there are possibilities of conflict in operation. While IBC allows companies to file for bankruptcy to provide relief to debtors or creditors, RERA looks at providing relief to homebuyers and seeks to hold developers or builders responsible if the project is delayed,” said an Assocham - Thought Arbitrage paper.
As per provisions of the IBC, homebuyers are “unsecured creditors” and as a result their priority to be compensated comes after those institutional or other creditors who have provided loans to the developer.
Scope for confusion prevails as for both RERA and IBC, the law states that it will prevail over other laws, it said.
“The two laws enacted in 2016 may have the best of intentions, but the Insolvency and Bankruptcy Code (Code) and the Real Estate (Regulation and Development) Act appear to be pitted against each other when it comes to resolving interest of bankers and homebuyers,” the paper said.