The real estate industry of India has experienced huge growth in the previous two decades due to massive investments into the sector. Nonetheless, the trends prior to 2018 revealed that the real estate sector was reeling under tremendous pressure and became inactive. The main reason for the pressure may be accorded to the dip in the confidence of prospective home buyers (real estate allottees) due to the rise in delays in the work completion and delivery of the projects. This resulted into that the homebuyers found their money locked up in the project. This created fear of uncertainty due to the lack of required remedies available in law to provide fast and effective relief to them. The enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) hardly seemed to appease the situation as it did not qualify to classify the homebuyers in any specific category of creditors and ignored them completely. After realizing the large-scale impact of frequent delays in the market because of the high valuation of debts owed to homebuyers. A necessity was felt to bring the homebuyers in the queue with the financial creditors, (any person to whom a financial debt is owed) so that, their dues can be given in the proceedings under the Code. Therefore an amendment was made in the IBC in July 2018, uplifting the status of the homebuyers as financial creditors.

Allottees as Financial Creditors- The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018.It included the allottees of real estate project as financial creditors under the code. The allottees could apply to initiate the Corporate insolvency resolution process (CIRP) against the corporate debtors (real estate developer) alike other financial creditor that is banks and financial institutions.[1]  This meant that the home buyers were finally armed with the weapon of triggering insolvency proceedings against the defaulting real estate developers under Section 7 of the IBC, and decide the future of the construction company[2]

Section 7 of the Insolvency and Bankruptcy Code 2016 has enumerated the detailed procedure of initiation of CIRP by financial creditor[3]

This was seen in the following cases

1. Nikhil Mehta and Sons (HUF) & Ors Vs M/s AMR Infrastructure Ltd.

2. Pioneer Urban land and Infrastructure Limited Vs Union of India and Ors


Home buyer in simple words means a person who purchases a house. The relationship between Insolvency ana Bankruptcy Code (IBC) and Homebuyers has been a sagacious one. As per Second amendment of the Insolvency and Bankruptcy Code 2018, the definition of ‘Financial Debt’ to include the amount raised from allottees in a real estate project.[4] Home buyers have been rewarded with much sought after relief by their inclusion as financial creditors. Home buyers as financial creditors now possess the right to initiate the CIRP under Section 7 of the Code. The Committee of Creditors which is constituted by the Interim Resolution Professional under Section 21 of the Code is comprised of all financial creditors of the corporate debtor. With the amendments to the Code coming into effect, home buyers shall be permitted to be included in the Committee of Creditors.[5]

Such inclusion is beneficial to the homebuyers in several ways.

1. The aggrieved homebuyers can commence and participate in the CIRP.

2. In accordance with the recognition accorded to the homebuyers under the Code, the homebuyers can participate in the decision-making aspects, ascertain the CIRP, approve or reject the Resolution Plan.

3. Home buyers shall be guaranteed an opportunity to receive the liquidation value under the Resolution Plan.


The Insolvency and Bankruptcy Code Amendment Act 2020 was assented by the president on 13th March 2020. The amendment brought many changes, it impacted the homebuyer’s rights to bring a claim against the developers under the Insolvency and Bankruptcy Code, 2016.[6]At the time, when homebuyers were given the status of financial creditors, around 1,281 cases had been filed against the developers for the delay in possession and completion of the projects[7]

Allegation were made by the real estate developers that homebuyers or allottees were not using the law properly. Homebuyers were not classified as creditors under the Code which lead to criticism. Therefore later after the amendment in 2018 they were given the status of financial creditors to homebuyers was criticized by the developers.

The Confederation of Real Estate Developers Association of India protested the amendment demanding threshold limit for homeowners to invoke the code, demanded that homeowners should firstly exhaust remedy under RERA.[8]

The homeowners had responded against the demands of developers, stating that the judgment rendered by the Supreme Court must be respected and the demands are illegal as such.[9]

Defaulting companies under the Insolvency and Bankruptcy Code (IBC) has been raised, with immediate effect, to ₹1 crore from ₹1 lakh earlier. Prior creditors had the right to file a case under IBC if a company defaulted on payment of ₹1 lakh or above, now this limit has been raised to ₹1 crore[10]

 Another amendment under IBC introducing a minimum threshold of 100 or 10% of the homebuyers, whichever is lower, to take a defaulting developer to the National Company Law Tribunal (NCLT).[11]

Section 3 of the amendment amends section 7 of the Insolvency and Bankruptcy code, putting condition precedent for the homebuyers that they can only initiate application under section 7 of the code, if the application is filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten percent. Of the total number of such allottees under the same real estate project, whichever is less – accepting the fact that the homeowners fall under the definition of financial creditors. Further, the amendment sought to bring a claim of as a compulsory “class action” suit, meaning in this case the claim has to be mandatorily filed by a group of homeowners of the same real estate project, as per the threshold.[12]

Further, the amendment also provides a 30-day window for the existing applicants to conform with the amended threshold.


Current scenario of homebuyers under Insolvency and Bankruptcy Code after the Ordinance has introduced a proviso to Section 7 of the said Code owing to which, an application for initiation of CIRP by homebuyers must come together and file an insolvency application by 100 or 10% of the allottees (whichever is less) under the same real estate project.

After the amendment was made in the Code the homebuyers were given the Status as of Financial Creditors. While homebuyers are now at par with financial creditors and can exercise their right, in selecting the resolution professional, they were earlier placed right at the bottom of the list in the Committee of Creditors. Under the earlier code, there are eight levels of distribution, in case a builder goes bankrupt and his assets are liquidated, to compensate the stakeholders.[13] Prior homebuyers were placed at number eight.

[1] Weighing the effect and need of the ‘minimum threshold’ on the home-buyers,www.scconline.com, Published on November 14, 2020 By Devika Sharma.

[2] Walking the Homebuyers Path, A confused Identity of IBC, http://www.legalserviceindia.com, Ojaswi Shankar.

[3] Section 7 of Insolvency and Bankruptcy Code 2016.

[4] The Insolvency And Bankruptcy Code (Amendment) Ordinance 2018: Analysing Significant Amendments, http://www.mondaq.com, 22 August 2018.

[5] Id.

[6] Homebuyers vs Developers: A tug of war, http://www.ibclaw.in, Anjasi shah, 24th April 2020.

[7] Developers resents buyers filing cases under IBC, Ashwini Kumar Sharma, http://www.livemint.com. 25th Nov 2019.

[8] Developers Resent Buyers filing Cases under IBC, ascgroup, https://www.ascgroup.in, 26 Nov 2019.

[9] Developers resents buyers filing cases under IBC, Ashwini Kumar Sharma, http://www.livemint.com. 25th Nov 2019.

[10] How will the recent amendment to IBC impact the rights of homebuyers? http://www.livemint.com, Ashwin kumar sharma 20 April 2020

[11] How Will The Recent Amendment To IBC Impact The Rights Of Homebuyers? http://www.mondaq.com, 29 May 2020.

[12] Homebuyers vs Developers: A tug of war, http://www.ibclaw.in, Anjasi shah, 24th April 2020.

[13] Setback For Buyers As SC Upholds Amendments To IBC, http://www.proptiger.com, Sunita Mishra, 21 Jan 2021.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

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