Complaint against builder under RERA or IBC?

As the fastest growing economy of the world, India is witnessing heavy development in the form of setting up of new industries, new residential development.

Rural population is heavily migrating around the metropolitan cities because of which heavy construction is going around the main cities of India like Mumbai, Kolkatta, Banglore, Delhi even many others. Mushrooming of builders with residential projects has been registered with heavy numbers but sadfully, the volume with which projects have been setup, out of which lots of builders had defaulted the money of innocent home buyers.

Cheated with their hard earn money, home buyers are finding several ways to recover their money like Civil litigations, Consumer forums, new law of Real estate Regulation Act(RERA), new law of Insolvency and Bankruptcy Code(IBC).

Complaint under IBC or RERA has their own kinds of pros and cons, to understand it we need first understand the conflict between rera and ibc.

Difference between RERA and IBC:

Basis of Difference

RERA

IBC

Adjudicating Authorities

Adjudicating authority of Real estate Regulatory Authority(RERA) is regulated under the real estate regulation act

Adjudicating authority of IBC is national company law tribunal(NCLT).

Court Fees

Fees for applying case in RERA is flat Rs.1000 or Rs.2000/- depending on state to state Authorities

The fees for filling complaint under IBC is Rs.25,000/- irrespective the amount of default

Pecuniary Limits for filling complaint

Under RERA, there is no pecuniary limits are prescribed for filling complaint

Under IBC, presently  minimum amount of default should be Rs.1,00,000/- for filling complaint {Central government has the power to raise this pecuniary limit upto Rs.1crore}

Prescribed time limits for disposing case

Under RERA total time prescribed for disposing complaint is 6months

Under IBC, the provision of straight penalties on the defaulters are not really well placed

Who can approach and Against whom complaint can be made

Under RERA, any one who is aggrieved can file complaint against any person who has made default

under IBC any one can file complaint but only against the corporate debtor, which means presently complaints under IBC can be made only against corporate defaulters which do not covers individuals and unlimited partnerships.

Penalty Clause

Penalty clause under RERA is very high against defaulters as high as 10% of total project cost

Under IBC, the provision of straight penalties on the defaulters are not really well placed

Ease of Litigations Litigations under RERA is relatively more easy than IBC

Litigations under IBC are not as simple incase of RERA since involves many technical stages like formation of committee of creditors, application of resolution plan etc.

For home buyers Which Way is more better to recover your:- RERA or IBC?

This is the most debated question but as my legal opinion RERA is much appropriate law wherein home buyers should go and file complaints since its less expensive, easy to litigate. But in certain situations IBC is better option, it depends on case to case. Under some cases, RERA do not grants the relief where complainant is seeking Refunds, if RERA feels that the refund of money would affect the interests of other home buyers, in terms of increased financial incapability of builder to complete project if refund granted to any buyer, such cases can be legally assessed to go under IBC.

Strongest Good and strongest bad Point under IBC:-

Since IBC is straight law which goes for the insolvency/liquidation of debtor for recovery of money towards the creditor, therefore it becomes high chances that the debtor may turned up paying back the payment of creditor I the very nascent stage of proceedings. But on other hand, there is also news, if under IBC once the corporate Insolvency resolution process (CIRP) begins and Committee of creditors (COC) is formed then the others creditors also do comes up in the picture, collectively taking the crucial decisions about the management of the corporate debtor which automatically creates the good chance of adversely affecting the interest of the creditor who have filled the complaint of CIRP.

Disclaimer:-The article is intended for the awareness and education of the readers, if any of reader is intended to use above in any legal work, it is advisable that before placing their reliance on it they reconfirm it from the legal experts.

About Author:- Rajul Jain (CA, MCOM, LLB, MBA, CNPO, CPFA, NCFM) is Chartered Accountant and Legal Consultant, academically he is highly qualified and have gone through various certifications. He extensively speaks and writes on finance, taxation and legal matters. The author can be reached at [email protected]