INTRODUCTION

The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code) allows two classes of creditors, namely, operational and financial, to apply for insolvency of a corporate debtor in case of default in payment. The Code as enacted did not specifically include or exclude allottees/homebuyers of real estate projects in either of the classes, while the apex court recognized them as Financial Creditors in certain situations and Operational Creditors in others, depending upon the facts and circumstances of each case. Subsequently, the Government of India amended the Code vide the Insolvency and Bankruptcy (Second Amendment) Act, 2018 (hereinafter referred to as the 2018 Amendment), which included homebuyers within the class of financial creditors and also gave them the right to representation in the Committee of Creditors. The same was challenged by various real estate developers and builders in the Supreme Court in the case of Pioneer Urban Land and Infrastructure Ltd. v. Union of India. This case commentary analyses the decision of Hon’ble Supreme Court in the said case while also discussing its impact and implications.

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