Supreme Court Revives Hope For Homebuyers In Subvention Matter


10 Feb 2024 6:16 AM GMT

  • Supreme Court Revives Hope For Homebuyers In Subvention Matter
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    In the dynamic landscape of real estate transactions, subvention cases have gained prominence due to their complex nature and far-reaching implications. However, the arrangement was that the homebuyers had to pay EMIs once possession is given and till that time the builder shall pay the EMIs to the banks or NBFCs. These cases often involve builders defaulting on Pre-Equated Monthly Income (EMI) payments, leaving homebuyers in a precarious position. One such controversy unfolded, leading to a legal saga that underscores the challenges faced by homebuyers, financial institutions, and the judiciary.

    The dispute in question commenced when a builder defaulted on the EMI payments, putting the burden on the petitioner, a homebuyer, to make payments to the bank or Non-Banking Financial Company (NBFC). Astonishingly, despite fulfilling their financial obligations, the homebuyer was denied possession of the property. Further Corporate Insolvency Resolution Process (CIRP) was initiated against the builder, resulting in a moratorium that prevented the petitioner from obtaining relief. The matter took a turn for the worse when Banks, seeking recourse for the defaulted payments, approached the homebuyers directly, affecting their Credit Information Bureau India Ltd (CIBIL) scores. As a consequence, legal action ensued, with banks filing recovery cases before various courts and tribunals, further complicating an already convoluted scenario.

    Delhi High Court Intervention:

    Faced with this dire situation, the petitioner in the case of Hridesh Pathak W.P. (C) 6774/2021 sought recourse in the Delhi High Court. The High Court, recognizing the urgency of the matter, granted interim relief by directing banks and NBFCs to refrain from taking coercive measures against the homebuyers. This protective shield extended as the proceedings unfolded, providing a semblance of respite to those affected. Moreover, the High Court, cognizant of the impact on the Credit Information Bureau India Ltd (CIBIL) scores, ordered banks and NBFCs to amend the scores to prevent financial prejudice to the homebuyers.

    However, this reprieve was short-lived. On March 14, 2023 in a batch, matters leaded with Supertech Urban Homebuyers Association (SUHA) v U.O.I. & Ors. W.P.(C) 9491/2020, the High Court lifted the granted relief following the pronouncement of a judgment by Justice Purushaindra Kumar Kaurav. The judgment, citing the contractual nature of the case, dismissed the writ petitions, deeming them maintainable but not entertainable.

    Supreme Court Intervention:

    Undeterred by the setback, the homebuyers decided to take their plight to the Supreme Court. Through a Special Leave Petition (SLP) in the case Sanjeev Kumar v. U.O.I. & Ors. SLP (C) 11307/2023, the homebuyers sought justice and reinstatement of the interim protection granted by the Delhi High Court.

    In a turn of events, the Supreme Court acknowledged the gravity of the matter and, revived the interim protection. The Supreme Court, in its pronouncement, stated, "Since the petitioner has had the benefit of interim protection from 25.05.2022 till the date on which the impugned order was passed, the petitioner shall be entitled to the benefit of the same interim protection till the next date of hearing." This decision marked a crucial step towards ensuring the continued safeguarding of the homebuyers' interests. The apex court's decision highlighted the unique challenges presented by subvention cases, emphasizing the need for judicial intervention to safeguard the interests of homebuyers.

    The subvention cases unravel a multifaceted web of legal intricacies in real estate transactions. The dismissal of writ petitions by the Delhi High Court underscored the reluctance of the judiciary to interfere in matters deemed contractual in nature. This brings to the fore the need for clear legal frameworks and safeguards to protect homebuyers from the repercussions of builder defaults.

    The Supreme Court's intervention serves as a beacon of hope for aggrieved homebuyers, demonstrating the judiciary's commitment to upholding justice and protecting the rights of the weaker party in contractual disputes. However, it also highlights the need for comprehensive reforms in real estate regulations to prevent the recurrence of such crises.

    Subvention cases present a challenging terrain where the interests of homebuyers, builders, and financial institutions intersect. The legal journey from the Delhi High Court to the Supreme Court in this particular case showcases the complexities involved in resolving such disputes. While the Delhi High Court's reluctance to entertain the writ petitions emphasizes the contractual nature of these cases, the Supreme Court's intervention underscores the imperative of judicial oversight in safeguarding the rights of homebuyers.

    As the real estate sector continues to evolve, policymakers must take cognizance of these challenges and work towards creating a robust legal framework that protects the interests of all stakeholders involved. Subvention cases serve as a stark reminder of the vulnerabilities inherent in real estate transactions and the pressing need for legal reforms to ensure a fair and transparent environment for all parties.

    Authors: Anshul Gupta (Partner) and Kirti Dua (Partner) at ANG Partners Advocates and Solicitors. Views are personal.

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