Builder Under Insolvency: What Homebuyers Can Do

My builder has gone into insolvency: is my money gone?

No, not automatically. Admission into insolvency means the NCLT has found that the company defaulted on a debt of ₹1 crore or more and has handed control of the company to an insolvency professional. The company still exists, the land and the half-built towers still exist, and your agreement still exists. What has changed is the route to getting your flat or your money back.

Before admission, you could file a RERA complaint, a consumer case or a civil suit on your own, and each buyer moved at his own pace. After admission, all of that stops against the company, and every creditor, including you, has to come into one process before the NCLT. In that process, the creditors look for a buyer or investor who will complete the project or pay out the creditors under a resolution plan. If no acceptable plan comes, the company is liquidated, which is usually the worst outcome for buyers.

So the honest answer is that your money is at risk, but it is not gone, and the buyers who file early, keep their papers in order and participate through their representative are in a far better position than those who wait and watch.

What does CIRP against a builder actually mean?

CIRP is the corporate insolvency resolution process under the Insolvency and Bankruptcy Code 2016. It starts on the date the NCLT admits a petition, which is called the insolvency commencement date. It can be started by a bank or other financial creditor under section 7, by a supplier or contractor under section 9 after a demand notice, by the company itself under section 10, or by homebuyers who meet the threshold explained below.

On admission, the NCLT appoints an interim resolution professional (IRP), declares a moratorium under section 14 and directs a public announcement. The IRP publishes the announcement in newspapers and on the IBBI website, usually within three days. The announcement gives the last date for claims, the name of the IRP, and for homebuyers, the names of three insolvency professionals from whom your class will choose an authorised representative.

The IRP then collects claims, forms the Committee of Creditors (CoC), and the CoC either confirms the IRP or appoints a new resolution professional (RP). The RP runs the company as a going concern, invites resolution plans, and puts them before the CoC. A plan needs 66% of the CoC's voting share. Once approved by the CoC and then by the NCLT, the plan binds everyone, including buyers who did not file a claim or who voted against it.

The process is meant to finish within 180 days, extendable by 90 days, with an outer limit of 330 days including time spent in litigation. Real estate cases routinely run longer than this, because of disputes over land, approvals and competing bids. Plan for a process of a year or more, not a few months.

The stages of a builder's CIRP and what you should do at each

This is the usual sequence. Dates vary from case to case, so follow the announcements and the authorised representative's emails.

How to file your claim as a homebuyer

Homebuyers file their claim in Form CA, which is the form for financial creditors who belong to a class. The IRP's announcement tells you where to send it; many IRPs now take claims by email or through an online portal.

1. Find the public announcement

   Search the IBBI website for the company's name, or look for the Form A notice in the newspapers on or after the admission date. Note the insolvency commencement date, the last date for claims, the IRP's address and email, and the three insolvency professionals named for the homebuyer class.

2. Work out your claim amount

   Add up every amount you paid towards the unit, including the booking amount, instalments, taxes paid to the builder, and any parking or club charges. If your agreement or a RERA order gives you interest or compensation, include it up to the insolvency commencement date and show the calculation. Do not add amounts you only expect to pay later.

3. Fill Form CA carefully

   Give your name exactly as in the allotment letter, the unit number, the project, the amount claimed, and your choice of authorised representative from the three names. If the flat is in joint names, both allottees should sign, or one should file with the other's consent in writing.

4. Attach the proof

   Attach the allotment letter, the builder buyer agreement, all receipts and bank statements showing payments, any home loan sanction and disbursement letters, and any RERA or consumer commission order in your favour. A claim without proof of payment is the one most often admitted at a lower figure.

5. Send it and keep proof of sending

   Email it to the claims address and, if the announcement asks, send a hard copy. Keep the sent email and courier receipt. File even if the date has passed: late claims are often still received, though a claim filed after a plan is approved is generally lost.

6. Check the list of creditors

   The IRP publishes a list of admitted claims on the company's insolvency page or the IBBI website. Check that your claim is there and at the right amount. If it has been admitted for less, write to the RP with the missing proof, and if that fails, an application can be made to the NCLT.

Our separate post on filing your claim with the resolution professional explains verification, rejection and late claims for all creditors in more detail.

Documents to gather before you file

Most buyers have these scattered across emails and folders. Collect them in one place now, because the same set will be needed again when the resolution applicant or a liquidator asks for verification.

How do homebuyers vote in the Committee of Creditors?

Homebuyers vote as a class through an authorised representative, not individually in the meeting. The IBC treats allottees as a class of financial creditors because there are often hundreds or thousands of them. The IRP names three insolvency professionals in the public announcement, and the one chosen by the largest number of buyers in the class becomes the authorised representative.

The authorised representative attends CoC meetings, circulates the agenda to the class and collects voting instructions. Under section 25A(3A), the authorised representative casts the votes of the entire class according to the decision of more than 50% of the buyers who actually voted. That rule cuts both ways. A small, organised group of buyers who vote can decide for everyone in the class, and buyers who ignore the emails have no say at all.

The weight of the homebuyer class in the CoC depends on the total of their admitted claims compared to the total financial debt, including bank loans. In many housing projects, buyers hold the majority of the voting share because they paid more to the builder than the banks lent. In others, a lender or an NBFC holds the larger share. Find out early what the split is in your case, because it tells you whether buyers can block or carry a plan on their own.

When Advocate B.K. Singh advises a buyers' association in a builder insolvency, the first thing he asks for is the latest list of creditors with voting shares. It shows at a glance who actually controls the outcome, and it often shows that dozens of buyers have not filed at all, which shrinks the class's weight for no reason.

Can I file an insolvency case against my builder myself?

Only together with other buyers. Since the 2020 amendment, a section 7 petition by allottees of a real estate project must be filed jointly by at least 100 allottees of the same project or 10% of the total allottees of that project, whichever is less. The Supreme Court upheld this threshold in Manish Kumar v Union of India (2021). The default must still be of ₹1 crore or more, which in a group petition is usually easy to show.

The Supreme Court went further in Mansi Brar Fernandes v Shubha Sharma (2025). It held that a buyer whose agreement is really an investment, with assured returns, buy-back clauses or post-dated cheques from the builder, and who wants money rather than a home, is a speculative investor and cannot use section 7. Such buyers keep their remedies under RERA, consumer law and civil law. The Court also asked the NCLT to record, at the admission stage, a prima facie finding on whether the applicants are genuine homebuyers.

Before starting insolvency, ask whether it is the right tool at all. Insolvency freezes every buyer's individual case, brings in banks and other creditors, and can end in liquidation. If the project is moving slowly but is viable, a RERA complaint for interest, or an application to RERA to take over the project, may serve buyers better. Our post on section 7 IBC petitions by financial creditors explains how a petition is drafted and decided.

What happens to my RERA complaint, consumer case or recovery certificate?

They stop against the builder company from the insolvency commencement date. The section 14 moratorium bars the institution or continuation of suits and proceedings against the corporate debtor, including execution of any judgment, decree or order. RERA authorities, consumer commissions and civil courts adjourn the matter sine die or dispose of it with liberty to revive. A recovery certificate issued by RERA cannot be executed against the company's property while the moratorium lasts.

Your order is not wasted, though. An order of RERA or a consumer commission fixes the amount due to you, and you should attach it to your claim as proof. The RP will usually admit the claim at that figure, subject to verification.

The moratorium protects only the company in insolvency. It does not protect a different company of the same group, even if that company signed some of your papers, and it does not protect directors or guarantors personally. Read the agreement to see exactly which company is the promoter, which company owns the land, and whether a sister concern collected any of your payments. Our post on the CIRP moratorium under section 14 explains what stops and what continues.

What the moratorium does and does not cover

• Stops: RERA complaints, consumer cases and civil suits against the builder company, and execution of orders already passed against it.
• Stops: transfer or sale of the company's assets by the old management, and recovery action by banks against those assets under SARFAESI.
• Stops: recovery of land or premises in the company's possession by an owner or lessor, which matters where a development authority has leased the project land to the builder.
• Does not stop: criminal cases for cheating or forgery against directors and promoters personally.
• Does not stop: cases against personal guarantors or group companies not in insolvency, though guarantors may face their own insolvency process under section 95.
• Does not stop: your home loan EMIs. The bank's loan to you is a separate contract, and missing EMIs will hurt your credit record even if the project is frozen.

Possession or refund: what can a resolution plan give me?

A resolution plan for a housing project usually offers buyers one of three things: completion and possession within a stated period, a refund of part of the amount paid, or a mix where buyers choose. Most plans in the NCR offer completion, because a resolution applicant earns its money by selling unsold units, not by paying refunds. Refund options, where offered, are often a fraction of the claim and spread over years.

Read the plan for the details that affect you. What is the new completion date, and what happens if it is missed? Will you have to pay the balance instalments, and at the old price or a revised one? Are interest and delay compensation for the past waived? Will your unit number, size and tower stay the same? Is a monitoring committee with buyer representation set up to watch implementation?

Once the NCLT approves a plan under section 31, it binds you even if you voted against it or never filed a claim. Claims not dealt with in the plan are extinguished, and the 2026 amendment has made that clean-slate effect explicit in a new section 31(6). This is why filing a claim, and voting, is not optional for a buyer who wants to protect his position.

If the plan gives buyers a choice between possession and refund, think about the project, not only the money. A modest refund paid in instalments by an unknown applicant can turn out worse than a completed flat delivered late. Speak to the authorised representative and look at the applicant's track record on other stalled projects before you choose.

Project-wise insolvency and the 2026 amendment

Most builder companies run several projects, and putting the whole company into insolvency because one project failed can drag down buyers in projects that were nearly ready. Tribunals responded by applying CIRP project by project in some cases, an approach the NCLAT developed and the Supreme Court supported in Mansi Brar Fernandes, where it said real estate insolvency should generally proceed project-wise and asked the IBBI to devise a way to hand over completed units to willing buyers.

The IBC (Amendment) Act 2026 received assent on 6 April 2026, and most of its provisions came into force in late May 2026. In general terms, it allows the sale of one or more assets of the company through one or more resolution plans, which makes separate plans for separate projects possible. It also provides that approvals linked to an approved plan, such as RERA registration and building approvals, are not suspended or cancelled for the rest of their term if the conditions continue to be met, which addresses a common reason why approved plans stalled.

The IBBI issued a discussion paper on real estate insolvency in June 2026, proposing project-wise accounts, a simpler claim form for allottees, disclosure of buyers' preferences between possession and refund, and handover of completed units during CIRP. These are proposals until notified as regulations, so check the current regulations, or ask the RP, before relying on any of them in your case.

What if the builder goes into liquidation?

Liquidation is the outcome to avoid. If the CoC rejects every plan, or no plan comes within the time, the NCLT orders liquidation under section 33. A liquidator takes over, sells the assets and distributes the money in the order fixed by section 53.

Homebuyers are financial creditors, but they are unsecured. In the section 53 waterfall, insolvency costs come first, then workmen's dues and secured creditors who give up their security, then employees, and only then unsecured financial creditors such as buyers. In a half-built project where the land is mortgaged to a lender, little may be left by the time the buyers' turn comes.

For that reason, buyers' representatives usually push hard for any viable plan over liquidation, even an imperfect one. If liquidation is ordered anyway, file your claim with the liquidator within the time in the liquidator's announcement. The process is explained in our post on liquidation under the IBC.

Can I challenge the resolution plan or the RP's decisions?

Yes, but only on limited grounds. The NCLT and NCLAT do not re-examine the commercial wisdom of the CoC, which means they will not ask whether a 30% refund was a good bargain. They check whether the plan complies with section 30(2) and the regulations: whether insolvency costs are paid, whether dissenting creditors receive at least their liquidation value, whether the plan is feasible and was approved by the required vote, and whether the process was fair.

If your claim was wrongly rejected or admitted for less, apply to the NCLT against the RP's decision before the plan is approved. After approval, the scope narrows sharply. An appeal against the NCLT's order approving a plan lies to the NCLAT under section 61, within 30 days, extendable by 15 days for sufficient cause, and on grounds such as a material irregularity by the RP or a breach of law. See our post on appeals to the NCLAT for the procedure.

Remedies against promoters, directors and guarantors outside the insolvency

The insolvency does not shield the people behind the company. If the promoters diverted buyers' money to other companies, took payments for units that were sold twice, or used forged approvals, a criminal complaint for cheating under section 318 BNS or criminal breach of trust under section 316 BNS can be made to the police, the Economic Offences Wing in Delhi or the economic offences unit in UP. For offences before 1 July 2024, the IPC sections apply. A criminal case will not get you your flat, but it puts pressure on the promoters and may help trace money.

If a director or promoter signed a personal guarantee in favour of buyers, or issued a cheque in his personal capacity that bounced, those remedies continue. Separately, the RP or the CoC can apply to the NCLT under sections 43 to 66 against preferential, undervalued or fraudulent transactions, which can bring diverted money back into the company for the benefit of all creditors, including buyers. Our post on director liability after a company goes into insolvency explains these applications.

Mistakes homebuyers make when a builder goes insolvent

• Waiting for the association to file for them. Each buyer must file his own claim. An association can coordinate, but it cannot claim on your behalf without your authority.
• Filing without proof of payment. Claims supported only by the builder's demand letters, without receipts or bank entries, are often admitted for less.
• Ignoring the authorised representative's emails. Voting instructions have short deadlines. Under section 25A(3A), the decision goes to those who vote.
• Stopping home loan EMIs. The moratorium protects the builder, not you. Talk to your bank about restructuring if you cannot pay.
• Filing fresh RERA complaints against the company. They will be adjourned or disposed of during the moratorium. Spend the effort on the claim instead.
• Accepting side deals from the old promoters. Offers from the former management to transfer you to another project or refund you privately may be void as preferential transactions, and you may be asked to return the money.

What to do this week

If you have just learnt that your builder is in CIRP, these steps protect your position. None of them needs to wait for a meeting.

• Find the Form A public announcement and note the claims deadline and the IRP's email.
• Collect the allotment letter, agreement, receipts, bank statements and any RERA or consumer order in one folder.
• Calculate your claim up to the insolvency commencement date, showing the working.
• File Form CA with the documents, and choose an authorised representative from the three names.
• Keep the sent email and any courier receipt.
• Join the buyers' group, but check every number against the official list of creditors, not forwards.
• Keep paying your home loan EMIs, and write to your bank about the insolvency.
• Read the company's insolvency page or the IBBI website every week for updates and the list of creditors.

When it helps to have an advocate involved

Most buyers can file a correct Form CA on their own. An advocate becomes useful when your claim is rejected or cut down, when a buyers' association wants to file under section 7 or oppose a plan, when the builder's group has other companies or guarantors worth pursuing, or when the project has a land authority dispute that affects whether any plan can work. These matters are heard by the NCLT benches in New Delhi or, for companies registered in UP, the Allahabad bench.

A point Advocate B.K. Singh often makes to buyers is that the insolvency file, not the builder's promises, is now the only document that counts: the claim, the list of creditors, the CoC minutes and the plan. Read them or have someone read them for you. If you want an advocate to look at your claim, the list of creditors or a plan before you vote, you can send an enquiry or read more about our NCLT practice in Delhi and the wider real estate practice.