PIONEER URBAN LAND AND INFRASTRUCTURE LIMITED & ANR. versus UNION OF INDIA & ORS.

Citation: [2019] 10 S.C.R. 381 · Decided: 09-08-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

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Judgment (excerpt)

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PIONEER URBAN LAND AND INFRASTRUCTURE
LIMITED & ANR.
v.
UNION OF INDIA & ORS.
(Writ Petition (Civil) No. 43 of 2019)
AUGUST 09, 2019
[R.F. NARIMAN, SANJIV KHANNA AND SURYA KANT, JJ.]
Insolvency and Bankruptcy Code, 2016:
ss. 5(8)(f), 21(6A)(b) and 25A – Amendments made to the Code
vide Amendment Act, which deem allottees of real estate projects to
be “financial creditors” so that they may initiate insolvency
proceedings u/s. 7 against the real estate developer and being
financial creditors, were entitled to be represented in the Committee
of Creditors by authorised representatives – Constitutional validity
of amendments made to the Code – Held: Constitutionality of the
Amendment Act is upheld – Amendment to the Code does not infringe
Arts. 14, 19(1)(g) r/w Art. 19(6), or 300-A – Constitution of India –
Arts. 14, 19(1)(g) r/w Art. 19(6), 300-A – Insolvency and Bankruptcy
Code (Second Amendment) Act, 2018.
s.7 – Amendment to the Code whereby home buyers categorized
as financial creditors under the Code – Reasons for amendment –
Held: Insolvency Law Committee found that delay in completion of
flats/apartments has become a common phenomenon, and amounts
raised from homebuyers contributes significantly to financing of
the construction of such flats/apartments – Thus, it was important,
to clarify that homebuyers are treated as financial creditors so that
they can trigger the Code u/s. 7 and have their rightful place in the
Committee of Creditors when it comes to making important decisions
as to execution of the real estate project in which homebuyers are
ultimately to be housed – Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018.
Insolvency and Bankruptcy Code vis-à-vis Real Estate
(Regulation and Development) Act (RERA) – Held: Real Estate
(Regulation and Development) Act is to be read harmoniously with
the Code, as amended by the Amendment Act – In case of conflict,
[2019]  10 S.C.R. 381
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SUPREME COURT REPORTS
[2019] 10  S.C.R.
the Code will prevail over RERA – It cannot be said that RERA is a
special enactment which deals with real estate development projects
and must, thus, be given precedence over the Code, which is only a
general enactment dealing with insolvency generally – Parliament
was aware of RERA, and applied some of its definition provisions
so that they could apply when the Code is to be interpreted – RERA
is in addition to and not in derogation of the provisions of any
other law for the time being in force – Also the remedies under
RERA to allottees were intended to be additional and not exclusive
remedies – Code and RERA operate in completely different spheres
– Code deals with a proceeding in rem in which the focus is the
rehabilitation of the corporate debtor by means of a resolution plan
which puts the same or another management in the saddle, subject
to the provisions of the Code, whereas, RERA protects the interests
of the individual investor in real estate projects by requiring the
promoter to strictly adhere to its provisions – Real Estate (Regulation
and Development) Act, 2016.
ss. 5(7), 5(8) and 5(21) – Financial Creditors and Operational
Creditors – Explanation of – Held: Financial creditor is defined u/
s. 5(7) as a person to whom a financial debt is owed and a financial
debt is defined in s. 5(8) to mean a debt which is disbursed against
consideration for the time value of money – An operational creditor
means a person to whom an operational debt is owed and an
operational debt u/s. 5(21) means a claim in respect of provision of
goods or services – Financial creditor may trigger the Code either
by itself or jointly with other financial creditors or such persons as
may be notified by the Central Government when “default” occurs.
ss. 5(8)(f), 21(6A)(b), 25A – Plea that treating home buyers/
allottees to be financial creditor is violative of Arts. 14, 19(1)(g)
and Art. 300-A; that the amendment is discriminatory inasmuch as
it treats unequals equally, and equals unequally, having no intelligible
differentia; and that there is no nexus with the objects sought to be
achieved by the Code – Held: Amendment Act to the Code does not
infringe Arts 14, 19(1)(g) rw Art. 19(6), or 300-A – Home buyers/
allottees give advance to the real estate developer and thereby
finance the real estate project at hand, are really financial creditors
– Objects of the Code are sub-served by treating allottees as financial
creditors – Code is, thus a beneficial legislat

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