Rights of Home-buyers in Insolvency Petition of Builders


The word insolvency has got new recognization in recent time after some of the renowned builders and developers resorted to insolvency.  While such builders were playing with laws, the rights of thousands of homebuyers were at stake. Homebuyers felt neglected as they had to face ample of loss. Although Real Estate Regulation and Development Act (RERA) was introduced to create transparency in the real estate sector, but RERA is not applicable to delays/ fraud prior to 01/05/2017.

Since then the Government and Indian Board of Bankruptcy in India (IBBI) has been working to protect the interest of homebuyers under the RERA Act. IBBI has made certain amendments in the insolvency rules that resolution plan for a company has to be stated clearly how it has dealt with the interest of all stakeholders.

This amendment was made in the rules in 5th October 2017 which was notified by the authority of insolvency and bankruptcy proceedings.

As per the law, if the creditors’ committee agrees, it will call for bid from other interested companies to take over the company after finalizing information memorandum.

There has been no commitment in the rules to give any remedy to the stakeholders other than the financial creditors (the banks) and operational creditors. This also includes vendors and others who may have dues.

The National Company Law Tribunal will provide final resolution plan as per the amendments made in the rules on the basis of bids that are received.

The change in the insolvency rules will be acting as a protective ambit for homebuyers. It aims at not only to secure the rights of homebuyers but also to ensure that they can file for the claim.

This will protect the interest of homebuyers by making sure that banks and other creditors who are the decision-making committee if the company admitted to bankruptcy don’t safeguard their interest leaving situation vulnerable for homebuyers who are majorly affected the RERA adulteration.

Note – Please note that the above article is for education purpose only. This is based on our interpretation of laws which may differ person to person. Readers are expected to verify the facts and laws.

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