Moneycontrol PRO
Upcoming Event : LeapToUnicorn - mentoring, networking and fundraising for startups. Register now

Supertech homebuyers | File your claims with insolvency professional and do not stop your EMIs

The National Company Law Tribunal has admitted an insolvency petition filed by the Union Bank of India against Supertech and appointed Hitesh Goel as the insolvency resolution professional (IRP).

Do not stop paying EMIs for your home loans even after your builder becomes insolvent. Else this can be another battle

Do not stop paying EMIs for your home loans even after your builder becomes insolvent. Else this can be another battle

Yet again, the fate of thousands of homebuyers is at stake after insolvency proceedings initiated against the real estate developer Supertech Ltd. At present, it is difficult to ascertain how insolvency proceedings against Supertech will unfold and its impact on home buyers, but one thing is certain that it will prolong the wait for home buyers for their dream homes that have been pending to be delivered for a long time. Many of the developer’s under-construction projects are already running at a delay of multiple years.

While as per the Insolvency and Bankruptcy Code, 2016 (the Code), the procedure involved in the Corporate Insolvency Resolution Procedure (CIRP) should be completed within a maximum of 330, similar previous insolvency proceedings are yet to be completed even after several years. For instance, insolvency proceeding against Jaypee Infratech was initiated in August 2017 and it is still far from completion even after close to five years.

Which is why, home buyers of Supertech need to be ready to take it as it comes. Here is what can be expected and what home buyers should do?

The job of an insolvency resolution professional (IRP)

An IRP plays an important role, once insolvency proceedings are initiated against a company. “Whenever a builder is declared insolvent, IBC provides two mechanisms—resolution or liquidation.

The resolution process will mean analysis of the builder’s financial position to see if the business can be revived. If not then, the builder’s assets will be liquidated and the proceeds will be used to clear the creditors’ claim,” says Harsh Pathak, Real estate matters counsel.

In simple words, IRP’s first attempt or objective is to chart out a revival plan, manage the fund flow and somehow settle the defaulted amount and keep the business going. If that is not possible, other companies are invited for bidding and the successful bidder firm buys out the defaulting company (in above case the developer).

If this happens the onus of paying the dues and completing the under-construction projects and delivering the units to home buyers shifts to the new company.

In the third scenario, when neither revival of the company is possible nor is there any bidder, the defaulting company goes for liquidation. That means assets are sold and proceedings out of it get distributed among creditors, shareholders and other claimants and stakeholders.

Out of all the insolvency proceedings initiated against companies since IBC got implemented, many companies have been revived as well as liquidated. “As per the publicly available data, a total of 4,946 corporate insolvency resolution processes have commenced up to the end of December, 2021. Out of it, the total number of matters that were closed is 3,247. About 1,733 have been resolved either through withdrawal, or approval of resolution plan or settled or appeal or review,” says Mani Gupta, partner, Sarthak Advocates & Solicitors.

If we talk about the insolvency proceedings related to the real estate sector, Gupta mentioned that “out of the total, approximately 20% (about 989) of the matters that were admitted pertained to the real estate sector. About 59 cases pertaining to real estate were resolved through approval of resolution plans and in about 319 cases pertaining to real estate the matter was either settled on review/ appeal or withdrawn.”

What should home buyers do?

Several projects of Supertech developer are now under corporate insolvency resolution process. If you have booked a unit or have some kind of stake in one of such projects, be vigilant about your responsibility.

“In order to safeguard their interest, the home-buyer should keenly follow the developments in the case and watch-out for various announcements from the resolution professional. These can be accessed through the website of Supertech itself,” says Mani Gupta, partner, Sarthak Advocates & Solicitors.

In the first place, the home-buyers should file their claim with the interim resolution professional. Further, the home-buyers should participate in decisions of the Committee of Creditors, as much as possible,” added Gupta.

Pathak echoes the thought and advises that as a homebuyer, “file your claims within the timelines announced by the insolvency resolution professional.”

Ideally, homebuyers should also get united and put forward their demand collectively. “It would be wiser for homebuyers to work collectively as a team to compel the authorities to ensure that either the delivery of the project is seen through, or the invested money is returned,” said Pathak.

However, one thing against which Pathak advises homebuyers is, “do not stop paying EMIs for your home loans even after your builder becomes insolvent.” Else this can be another battle.

The worries

All that home buyers want is timely delivery of their house as per the committed amenities and terms. However, the situation is such that most of the homebuyer is not even concerned about the timely delivery, all that they want is that the house is delivered as soon as possible, even if they have to compromise on a few promises made by the developer at the time of booking.

With initiation of insolvency proceedings many home buyers are now fearing further delay, which is very much evident. The bigger worry here is what if the company goes for liquidation that could further jeopardise the future of thousands of homebuyers.

Keep watching this space for more.

Moneycontrol PF Team