Pioneer Urban Land and Infrastructure Limited & Anr. versus Union of India & Ors.

(Writ Petition (Civil), 43 of 2019, Judgment Date: Aug 09, 2019)

  • Pioneer Urban Land and Infrastructure (Builders) had filed a plea in the Supreme Court in January 2019 challenging the constitutional validity of section 5 (8) (f) of the IBC 2016 under which homebuyers were conferred the right of financial creditors.


Question of law: Amendment made in IBC is constitutionally valid?

The Supreme Court upheld the amendment in the Insolvency and Bankruptcy Code that confers them the status of financial creditors. Genuine homebuyers will have a say in committee of creditors and have the right to initiate insolvency proceedings.

This means that home buyers will be treated at par with banks and institutional creditors, and will be given priority while recovering dues from bankrupt or insolvent real estate companies.

  • The order ensures buyers a seat at the Committee of Creditors’ table, and enables them to co-drive the process of resolution of the real estate firm. It recognises the rights of homebuyers who contribute equally in financing of a real estate projects.
  • Builders had earlier this year challenged Section 5 (8) (f) of the IBC through writ petitions, and had argued that home buyers already had remedies under RERA, and amendments to the IBC amounted to duplication.

RERA to be read in harmony with IBC

  • The bench said that the RERA act, which regulates the real estate sector, should be read in harmony with the IBC amendments. RERA is not in derogation of any act, and in case of conflict between RERA and IBC, IBC prevails.
  • The consumers have the option of seeking remedy under any provision — the Consumer Protection Act, IBC or RERA.

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