Free Press Journal

Mumbai: Builders prone to hide behind bankruptcy cover to avoid RERA

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Mumbai: The infamous Jaypee Infratech’s insolvency case has brought to light a possible clash between two new laws — Insolvency and Bankruptcy Code (IBC) and the Real Estate (Regulation and Development) Act (RERA). The RERA team and Insolvency and Bankruptcy Board of India (IBBI) met recently to discuss ways to resolve this issue.

IBC allows companies (or developers) to file for bankruptcy to provide relief to debtors or creditors whereas RERA looks at providing relief to home buyers and holds developers or builders responsible if the project is not released on time. “RERA and IBC have a conflict,” Gautam Chatterjee, chief, Maharashtra, RERA admitted during an event in the city.

“During a meeting, we and IBBI discussed this issue. We informed the Bankruptcy Board that we should at least be informed if a registered developer approaches National Company Law Tribunal’s (NCLT) to move the bankruptcy code,” added Chatterjee. He told Free Press Journal that RERA will take up the issue with ministry of housing and urban affairs. IBBI will also be raising the issue with Ministry of Corporate Affairs.


At present, the Jaypee case is at the Supreme Court and the court has asked the firm to pay Rs 50 lakh as an interim relief to 10 home buyers of its Kalypso Court project. Without mentioning the Jaypee case, he said that at present there was a case in the apex court whose verdict would be helpful in getting clarity. Chatterjee said RERA is trying to protect customers’ rights and that should not be hampered as developers file for bankruptcy.

Also read: Mumbai: RERA is helpless in 2 city projects

The confusion prevails due to a line that is included in both RERA and IBC, stating that Act/Law will prevail over other laws. So logically, IBC came into effect on Dec 2016 and RERA commenced on May 2016. Thus, giving IBC more power than RERA. In real estate business, this can be translated as loss-making developers getting upper hand and leaving the customers hurt.