Blogs
Ozone Urbana Insolvency: What Every Homebuyer Must Do Immediately Specially those under the Subvention Scheme or Profile Funding
Ozone Urbana Insolvency – A New Challenge for Thousands of Homebuyers
The recent commencement of insolvency proceedings against Ozone Urbana Insolvency by the National Company Law Tribunal (NCLT), Bengaluru Bench, has created significant uncertainty for thousands of homebuyers who invested in the project, particularly those who purchased apartments under a subvention scheme.
While insolvency proceedings facilitate the resolution of financially distressed companies, they often create immediate hardships for homebuyers who have taken loan from banks/ NBFC or financial institutions. One of the most pressing concerns in the Ozone Urbana Insolvency matter is the fate of buyers whose builders promised to service the EMIs until possession. In such cases bank would keep on charging the interest and would keep on reporting to the CIBIL for all defaults of non-payment of EMI’s.
Effects of insolvency of Ozone Builder/ Ozone Urbana Insolvency on the Home Buyers
The Builder Company has entered the moratorium phase under the Insolvency and Bankruptcy Code, which means that the Company is legally and otherwise dead.
Upon Company going under insolvency, the NCLT will appoint an Insolvency Resolution Professional (IRP) to take control of the company. That officer is called IRP I.e. Insolvency Resolution Professional.
Homebuyers cannot file civil suits, consumer complaints, RERA complaints, recovery actions, or enforcement proceedings against the builder during the moratorium.
Homebuyers, must file claims before the IRP to protect their rights.
Insolvency of Ozone Urbana Insolvency Project vis-a-vis Subvention Scheme
A subvention scheme is a financing arrangement where the homebuyer obtains a housing loan from a bank or financial institution, but the builder undertakes the responsibility of paying the EMIs (or pre-EMI interest) until possession or for a specified period.
Builders marketed these schemes as “No EMI Till Possession”” offers and encouraged buyers to purchase under-construction properties without bearing the financial burden during construction.
Need for Immediate Judicial Protection
When the Builders enter into insolvency, the Builder will lose control over its bank accounts also. This means that the builder cannot pay EMIs on behalf of the Homebuyers. As soon as that happens, banks will mark the loan accounts of homebuyers under the subvention scheme as default if the builder stops paying EMIs. Upon such Defaults, Banks may file multiple legal proceedings against the homebuyer including Civil Cases, Cheque Bounce Cases, EMI bounce Cases, Criminal Cases etc. Homebuyers should also note that banks often file cases in states other than the borrower’s place of residence. For Example: – If you are living in Bangalore, Bank will file case in Mumbai or Delhi or some other State.
The best Judicial Protection at this time is Homebuyers should immediately file a writ petition before the Karnataka High Court or the Supreme Court to stop coercive recovery action by banks.
The Supreme Court continues to grant interim stays in Ozone Urbana Insolvency Cases. Additionally, the Supreme Court has also directed a CBI inquiry against the Builder.
Profile Funding Angle
The Profile Funding scam has trapped many Ozone Urbana homebuyers because Director S. Vasudevan and the builder allegedly committed fraud. The builder already inflated flat prices, already inflated at the time of Agreement, most profile funding buyers never paid an actual down payment to the builder. so even at later stages in insolvency proceedings, the profile funding homebuyer will not be able to corroborate these payments with bank statements. There might also be a situation that the builder may sell the same flat to multiple allottees. Multiple claims before the IRP will expose this issue, when all the persons will file the claim before the IRP.
Impact of Insolvency on Subvention/ Profile Funding Homebuyers
With Ozone Urbana Insolvency now undergoing insolvency proceedings, the builder may soon stop paying EMIs under the subvention scheme.
This creates multiple problems simultaneously:
Banks may begin demanding EMIs directly from homebuyers.
Banks may classify loan accounts as overdue, despite the buyer not being responsible for the default.
Banks may report payment defaults, which can negatively affect the homebuyer’s credit score.
Banks may initiate recovery proceedings under applicable banking laws.
Bank may file cheque bounce and EMI bounce cases.
Bank may blacklist the homebuyer from banking system.
Personal Properties of the Homebuyer may be attached.
After Effects of the Moratorium on Civil and Consumer and RERA Cases filed by the Homebuyer
Once the insolvency moratorium comes into force, all civil, consumer, RERA and similar proceedings against the builder are frozen. No new civil or consumer or RERA cases can be filed against the corporate debtor during the moratorium period, and Courts generally stay pending matters during the moratorium. Even the homebuyers with a Court judgment against the builder will become helpless.
This means that homebuyers will not be able to initiate fresh consumer complaints or civil suits against the builder while the moratorium continues. The practical effect is that the moratorium puts legal action on hold, and buyers must usually wait for the insolvency process to move forward before pursuing such remedies.
Insolvency Does Not Automatically Protect Homebuyers From Bank Recovery
A common misconception is that once a builder enters insolvency, all legal proceedings relating to the project automatically stop.
In reality, while the Insolvency and Bankruptcy Code imposes a moratorium protecting the corporate debtor, disputes between banks and individual borrowers may continue to raise complex legal questions depending upon the contractual arrangements and the relief sought.
Consequently, many homebuyers may still receive recovery notices or demands from lending institutions if the builder stops servicing the loan.
The Road Ahead
The insolvency of Ozone Urbana highlights the risks associated with builder-backed subvention schemes. Thousands of families now face uncertainty—not only regarding possession of their homes but also regarding repayment obligations that were originally undertaken by the builder.
Homebuyers should act without delay by:
- Filing their claim before the IRP.
- Preserving all contractual and banking documents.
- Monitoring the insolvency proceedings.
- Filing the Petition before the Supreme Court of India or Karnataka High Court and getting stay.
How We Can Assist
Our firm regularly advises homebuyers affected by builder defaults, delayed possession, fraudulent subvention arrangements, and insolvency proceedings. We assist clients in filing claims before the IRP, protecting their rights in insolvency proceedings, and pursuing appropriate legal remedies against builders and financial institutions before the Hon’ble Supreme Court of India
If you are an affected Ozone Urbana homebuyer, timely legal action can be critical in safeguarding your interests.