In the context of the government contemplating amendments to the Insolvency and Bankruptcy Code (IBC) to provide relief to homebuyers, experts are suggesting similar adjustments to the Prevention of Money Laundering Act (PMLA). The Insolvency and Bankruptcy Board of India (IBBI) has recommended that the Committee of Creditors (CoC) should seek distinct resolution plans for individual real estate projects instead of encompassing the entire firm in the resolution process, especially if only one project faces challenges.
These proposed changes align with the Real Estate Regulatory Authority (RERA) Act, which allows the registration and monitoring of each project as a separate unit before insolvency. Consequently, experts argue that PMLA should undergo similar amendments, as the existing RERA provisions may not adequately protect homebuyers when the property is subject to attachment under PMLA.
Amit Jajoo, a partner at INDUSLAW, suggests that the necessary amendment could involve excluding properties already sold to homebuyers from attachment orders. Currently, under PMLA, when the Enforcement Directorate (ED) attaches real estate projects, homebuyers may receive eviction notices even if they have already taken possession of their flats. The release of attached properties is contingent on the conclusion of the trial against the developer in courts.
In recent instances, such as the SRS Group case, over 800 homebuyers received eviction notices despite having possession of their flats. To address this issue, experts propose amending PMLA to make it mandatory for the ED to include all homebuyers as necessary parties in confirmation proceedings before the Adjudicating Authority. This would provide homebuyers with an opportunity to declare their sources of income and reconcile PMLA with the Transfer of Property Act, specifically Section 53A, which deals with part performance by homebuyers.
Anirudh Sood from Lex Ajia Advisors suggests that PMLA should be amended to ensure separate and expedited proceedings for the detachment of properties belonging to homebuyers from the ED. This would allow homebuyers a fair opportunity to defend their case. The objective is to prevent scenarios where homebuyers face attachment proceedings despite having paid the entire consideration, with the conveyance deed yet to be executed.
