JAIPUR: In a landmark ruling aimed at safeguarding homebuyers, the Rajasthan Real Estate Regulatory Authority (RERA) has determined that banks and financial institutions cannot assert claims over apartments booked to buyers prior to the establishment of a loan.
The authority further stated that RERA proceedings may proceed against builders’ directors and landowners, even amidst insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).
This decision was made by Rajasthan RERA chairperson Veenu Gupta on February 19 and was published on Saturday, relating to the Avalon Royal Park housing project located in Bhiwadi.
The project, initiated in 2012 by M/s G R J Distributors and Developers, aimed to construct over 1,200 flats, promising possession by 2017. Between 2012 and 2016, over 700 flats were sold, gathering nearly Rs 300 crore—approximately 90% of the total sale value—yet the project remains primarily unfinished, with most structures only reaching the skeletal stage, according to Mohit Khandelwal, counsel for the allottees association.
Khandelwal noted that in 2018, the builder mortgaged the entire project to ECL Finance Limited, securing a loan of Rs 50 crore. “In the wake of a repayment default, insolvency proceedings were initiated before the National Company Law Tribunal in Delhi and handled by Invent Asset on behalf of the lender,” he stated.
The builder subsequently sought to cease RERA proceedings by citing insolvency.
“We firmly contested this, asserting that the mortgage was invalid since the flats were already allocated,” he added. The association further accused the builder of misappropriating allottees’ funds and colluding with the lender.
RERA concluded that the “landowner was actively engaged in the project and financially benefitted.” It ruled that “insolvency proceedings do not hinder actions against former directors and the landowner.”
Notably, RERA determined that banks’ claims cannot supersede the rights of existing allottees and cannot be enforced against flats that have already been sold.
