--- title: "What Are the Rights of Homebuyers in Corporate Insolvency Proceedings? " date: 2026-10-01 author: "Pallash Pamnani" url: https://ksandk.com/corporate/homebuyer-rights-corporate-insolvency-ibc/ --- # What Are the Rights of Homebuyers in Corporate Insolvency Proceedings?  Posted On - 1 October, 2026 • By - Pallash Pamnani ![Homebuyers’ legal rights during corporate insolvency proceedings, with a house, gavel and construction site.](https://ksandk.com/wp-content/uploads/ChatGPT-Image-Sep-30-2026-05_48_44-PM-1.png) ## Introduction Homebuyers in India have gained substantial protections under the Insolvency and Bankruptcy Code, 2016 (IBC) when [real estate developers](https://ksandk.com/corporate/india-uk-fta-retail-luxury-ecommerce/) face corporate insolvency. What began as limited recognition has evolved through amendments, regulations, and Supreme Court rulings into a framework that prioritises project completion, possession, and collective participation over pure recovery. As of 2026, following the IBC (Amendment) Act, 2026 (largely effective from 26 May 2026) and supporting IBBI regulations, homebuyers stand as financial creditors with defined rights in the Corporate Insolvency Resolution Process (CIRP).  This article explains the current legal position, key rights, recent reforms, practical steps, and remaining challenges so that allottees can navigate insolvency proceedings effectively.  ## **Evolution of Homebuyer Status under the IBC** Before 2018, homebuyers were generally treated as operational creditors or consumers with weaker standing. The 2018 amendment inserted an explanation to Section 5(8)(f) of the IBC, classifying amounts paid by allottees in a real estate project as financial debt. This elevated genuine homebuyers to the status of financial creditors.  The Supreme Court upheld this classification in *Pioneer Urban Land and Infrastructure Ltd. v. Union of India*. Later rulings refined the distinction: genuine homebuyers seeking possession are protected, while speculative investors (those with buy-back clauses or [assured returns](https://ksandk.com/corporate/ccps-faqs-venture-capital-india/)) cannot invoke Section 7 to trigger insolvency. The 2025 decision in *Mansi Brar Fernandes v. Shubha Sharma* reinforced this line and directed the Insolvency and Bankruptcy Board of India (IBBI), in consultation with Real Estate Regulatory Authorities (RERAs), to develop sector-specific guidelines.  The Insolvency and Bankruptcy Code framework now treats homebuyer funds as a critical source of [project finance](https://ksandk.com/corporate/green-shoe-option/). Real estate cases form a large share of IBC proceedings, and homebuyers account for a significant portion of complaints received by the IBBI.  ## **Core Rights of Homebuyers in CIRP** 1. **Right to Initiate Corporate Insolvency Resolution Process**: Homebuyers can file a Section 7 application before the National Company Law Tribunal (NCLT) if the developer has defaulted. The threshold is 100 allottees or 10 per cent of the total number of allottees in the project (whichever is lower). Individual filing is restricted to prevent misuse, but collective action remains available. Once admitted, a moratorium under Section 14 applies to the corporate debtor.  1. **Status as Financial Creditors and Voting Rights**: Allottees form a class of financial creditors. Their voting share in the Committee of Creditors (CoC) is proportional to the amount paid. Because numbers are large, they act through an Authorised Representative (AR) appointed under Section 25A. The AR votes according to the majority decision of the class. Individual members are bound by the collective decision of their class.  1. **Right to Submit and Participate in Claims**: Homebuyers must file claims with the Resolution Professional (RP) within the stipulated period (usually 90 days from the insolvency commencement date, with limited extensions). Claims should include allotment letters, payment receipts, and agreement details. Recent NCLAT rulings have directed inclusion of late claims where payments appear in the corporate debtor’s records, treating such allottees equitably as financial creditors in a class.  1. **Preference for Project Completion and Possession**: Courts and regulators increasingly favour resolution plans that complete the project rather than liquidation or pure refunds. The Supreme Court has directed that verified and admitted claims entitle homebuyers to possession and conveyance under an approved resolution plan. They cannot be relegated to the status of belated refund seekers once their claims are admitted.  1. **Possession During Ongoing CIRP**: Under the IBBI (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2025 (Regulation 4E), the RP may hand over possession of plots, apartments or buildings during the CIRP after CoC approval (66 per cent vote) and fulfilment of the allottee’s obligations. The Supreme Court has required the CoC to record specific written reasons if it declines such handover. Flats already handed over before CIRP commencement are generally excluded from the corporate debtor’s assets and are not subject to the moratorium.  1. **Project-Wise and Asset-Level Resolution**: The 2026 Amendment expands the definition of a resolution plan under Section 5(26) to allow sale of one or more assets through one or more plans by different applicants. This supports project-specific CIRP rather than putting the entire company into insolvency, protecting viable projects and their homebuyers. IBBI discussion papers in 2026 further propose ring-fencing of project accounts, mandatory cost-to-complete assessments, and mechanisms to exclude completed or independent projects from CIRP by CoC vote.  1. **Protection Against Promoters and Parallel Remedies**: The Section 14 moratorium protects only the corporate debtor. In a July 2026 ruling, the Supreme Court clarified that promoters and directors cannot use the IBC shield against independent liability claims by homebuyers. Consumer complaints against individuals may continue. Where RERA refund rights conflict with an approved resolution plan, the IBC prevails under Section 238; individual homebuyers are bound by the majority decision of their class.  1. **Rights in Liquidation**: If the process moves to liquidation, homebuyers retain priority consistent with their financial creditor status. Properties already transferred or in possession are protected. A statutory charge under Section 55(6)(b) of the Transfer of Property Act may support secured status for amounts paid, even if not registered with the ROC or CERSAI, according to recent NCLT decisions.  ## **Comparison of Key Rights: Homebuyers vs Other Creditors** | **Aspect**  | **Homebuyers (Allottees)**  | **Secured Financial Creditors (Banks/ARCs)**  | **Operational Creditors / Other Consumers**  | | --- | --- | --- | --- | | Creditor Classification  | Financial creditors (Section 5(8)(f))  | Financial creditors  | Operational or other creditors  | | Right to Initiate CIRP  | Yes (threshold: 100 or 10%)  | Yes (individual or joint)  | Limited (Section 9 thresholds)  | | Voting in CoC  | Yes, via Authorised Representative  | Direct voting rights  | No  | | Priority in Resolution Plan  | Strong preference for possession/completion  | Commercial recovery focus  | Lower priority  | | Possession During CIRP  | Possible with CoC approval (Reg 4E)  | Not applicable  | Not applicable  | | Effect of Moratorium on Individuals  | Does not protect promoters/directors  | Personal guarantors may face separate action  | Limited  | | Interplay with Sector Law  | IBC overrides conflicting RERA claims once plan approved  | Standard  | Consumer Protection Act may apply  | This table highlights why homebuyers enjoy a unique position focused on delivery of homes rather than pure monetary recovery.  **Practical Steps for Homebuyers**  - Gather all documents: allotment letter, builder-buyer agreement, payment receipts, RERA registration details, and correspondence.  - Monitor public announcements of CIRP and claim invitation by the RP.  - File claims promptly in the prescribed form (simplified allottee-specific forms have been proposed).  - Participate through the AR and stay informed of CoC meetings and resolution plan options (possession versus refund with interest).  - If already in possession, assert that the unit falls outside the liquidation estate.  - For promoter-level grievances, pursue parallel consumer or civil remedies where independent liability exists.  ## **Remaining Challenges and Emerging Reforms** Fragmentation among large groups of homebuyers, dominance of institutional lenders in the CoC, and delays in plan implementation remain practical hurdles. Speculative claims continue to require careful filtering. The IBBI’s June 2026 discussion paper on strengthening real estate insolvency outcomes proposes further measures: project exclusion mechanisms, ring-fenced accounts aligned with RERA, mandatory technical assessments, simplified claim forms, and greater RERA participation in monitoring committees. These reforms aim to make resolution more completion-centric.  Homebuyers should also note that resolution plans bind the class; minority dissenters cannot insist on individual RERA refunds once a majority-backed plan is approved and sanctioned under Section 31.  ## **Conclusion** The rights of homebuyers in corporate insolvency proceedings have strengthened considerably by 2026. Recognition as financial creditors, voting participation via authorised representatives, preferential treatment for project completion, the ability to receive possession during CIRP, and project-wise resolution tools under the 2026 Amendment provide meaningful safeguards. Official resources such as the [IBBI regulations and circulars](https://ksandk.com/corporate/rbi-draft-foreign-investment-rules-2026/) remain the primary reference for procedural details.  Homebuyers should act collectively, document thoroughly, file claims on time, and engage actively through their authorised representative. While challenges persist, the evolving framework increasingly places the delivery of homes at the centre of real estate insolvency resolution. Staying informed of NCLT, NCLAT and Supreme Court developments, along with IBBI updates, remains essential for protecting these hard-won rights.  ## Frequently Asked Questions ### 1. Are homebuyers treated as financial creditors under the IBC? Yes. Under Section 5(8)(f) of the Insolvency and Bankruptcy Code, amounts raised from real estate allottees are treated as financial debt, making eligible homebuyers financial creditors. They can participate in the Committee of Creditors through an Authorised Representative. ### 2. Can homebuyers initiate insolvency proceedings against a real estate developer? Yes. Homebuyers can initiate CIRP against a defaulting real estate developer under Section 7 of the IBC, subject to the prescribed threshold of at least 100 allottees or 10% of the total number of allottees in the same project, whichever is lower. ### 3. Do homebuyers have voting rights during corporate insolvency proceedings? Yes. Homebuyers are represented as a class of financial creditors in the Committee of Creditors. Their voting rights are exercised through an Authorised Representative, who votes according to the decision of the required majority of the homebuyers represented by that class. ### 4. Can homebuyers get possession of their flats during CIRP? Possession may be handed over during CIRP where the applicable requirements are satisfied and the Committee of Creditors approves the handover. The article also notes the 2025 regulatory framework permitting possession of plots, apartments or buildings during CIRP subject to specified conditions. *Last Updated on 1 October, 2026* Get King Stubb & Kasiva’s legal updates in your Google feed[![Add King Stubb & Kasiva as a preferred source on Google](https://ksandk.com/wp-content/uploads/google_preferred_source_badge_light_en@2x.png)](https://www.google.com/preferences/source?q=https://ksandk.com/) --- ## Office Locations - [New Delhi](https://ksandk.com/locations/top-corporate-law-firm-in-delhi/) (HQ): +91-11-41318190 | info@ksandk.com - [Mumbai](https://ksandk.com/locations/top-corporate-law-firm-in-mumbai/): 3 offices (Nariman Point, Lower Parel, Andheri) | mumbai@ksandk.com - [Bangalore](https://ksandk.com/locations/top-corporate-law-firm-in-bangalore/): bangalore@ksandk.com - [Chennai](https://ksandk.com/locations/chennai/): chennai@ksandk.com - [Hyderabad](https://ksandk.com/locations/hyderabad/): hyderabad@ksandk.com - [Pune](https://ksandk.com/locations/pune/): pune@ksandk.com - [Kochi](https://ksandk.com/locations/kochi/): kochi@ksandk.com ## Contact - [Contact Page](https://ksandk.com/contact-us/) - General: info@ksandk.com | +91-11-41318190 - WhatsApp: +91-7428567444 - [Privacy Statement](https://ksandk.com/privacy-statement/) - [Terms of Use](https://ksandk.com/terms-of-use/)