An updated, search-engine-optimised version of the article incorporates the pathbreaking modifications introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, recent IBBI guidelines, and landmark judicial updates.

How Can a Real Estate Buyer File Insolvency Proceedings Against a Developer in NCLT? (Updated 2026)

Investing hard-earned money into a dream home only to face endless project delays is an exhausting ordeal for any homebuyer. When real estate developers default on their promises, buyers look for strict legal options to protect their investments.

While the Real Estate (Regulation and Development) Act, 2016 (RERA) remains a dedicated platform for individual grievances, the Insolvency and Bankruptcy Code, 2016 (IBC) offers a powerful collective solution. Following the landmark IBC (Amendment) Act, 2026, the process has become considerably more streamlined and protective for genuine allottees.

The following guide details how real estate buyers can initiate Corporate Insolvency Resolution Process (CIRP) proceedings against a defaulting builder before the National Company Law Tribunal (NCLT).

1. Legal Status of Homebuyers under the IBC

The landmark amendment to the IBC in 2018 established that real estate allottees (homebuyers) hold the status of Financial Creditors under Section 5(8)(f) of the Code. This legal status grants buyers two critical advantages:

• The authority to initiate insolvency proceedings against a defaulting corporate builder under Section 7 of the IBC.
• Voting rights in the Committee of Creditors (CoC), allowing buyers an active voice in shaping the resolution or restructuring plan of the distressed company.

2. The Minimum Threshold Required to File an NCLT Application

To prevent single or disgruntled buyers from abruptly halting viable projects, the law mandates a specific threshold for filing a case. To file a Section 7 application against a real estate developer, you must meet the minimum threshold requirement (whichever is lower):

1. At least 100 allottees from the same real estate project, OR
2. At least 10% of the total number of allottees under the same project.

Critical Legal Principles on Thresholds:

• The Single-Project Rule: The threshold calculation is strictly limited to the specific joint project or phase in default, rather than the developer’s entire corporate portfolio.
• RERA Decree Holders Count: In a significant clarification, the courts have ruled that homebuyers who have already obtained recovery certificates or refund decrees from RERA do not lose their status as “allottees”. They can still be counted toward the 100-allottee or 10% threshold required to trigger Section 7 proceedings.

3. Revolutionary Updates for Homebuyers in 2026

The IBC (Amendment) Act, 2026, and recent IBBI regulations introduced changes designed to safeguard buyer interests during insolvency:

• Project-Wise Resolution (Ring-Fencing): Previously, triggering insolvency pulled the builder’s entire corporate entity into the NCLT process, freezing construction across all otherwise profitable projects. The 2026 Amendment formally codifies Project-Wise CIRP. If a developer defaults on a single project, the NCLT can isolate and resolve only that specific project, allowing other viable sites to continue uninterrupted.
• Interim Possession Handover (Regulation 4E): RPs are now legally empowered to deliver actual possession of completed flats or plots to buyers during the ongoing insolvency process, provided they obtain a 66% approval vote from the CoC.
• Protection from Liquidation Assets: Allottees’ properties are largely ring-fenced from the developer’s general liquidation estate, protecting buyers from losing their homes if the company faces ultimate liquidation.

4. Step-by-Step Procedure to File an Insolvency Application

Step 1: Formulating the Group and Verifying the Threshold

Connect with fellow buyers via homebuyer associations. Ensure your combined strength satisfies the 100-allottee or 10% project-specific criteria.

Step 2: Issuing a Legal Notice / Identifying Default

Unlike operational creditors, financial creditors do not have a mandatory statutory requirement to issue a Section 8 demand notice. However, you must compile unambiguous evidence of default (e.g., missed possession deadlines stipulated in the Builder-Buyer Agreement, or non-payment of assured returns). The minimum default amount for the corporate debtor as a whole must be at least ₹1 Crore.

Step 3: Preparing and Filing Form 1

File the insolvency application under Section 7 of the IBC using Form 1, submitted before the NCLT bench having territorial jurisdiction over the corporate builder’s registered office. The application must include:

• A comprehensive list of all co-applicants demonstrating that the threshold is met.
• The Builder-Buyer Agreements, allotment letters, and receipts of all payments made.
• Bank statements verifying the financial transactions.
• A proposal naming an Interim Resolution Professional (IRP) to oversee the process.

Step 4: The NCLT Admission Hearing

The NCLT reviews the application to verify the existence of a default and ensure the filing threshold is compliant. Upon satisfaction, the NCLT formally admits the application, triggering a moratorium under Section 14 that temporarily halts all other parallel civil courts or recovery actions against the isolated project.

5. Landmark Judgments Shaping Real Estate Insolvency

1. (Supreme Court)

Mansi Brar Fernandes v. Shubha Sharma & Anr.

The Principle: The Supreme Court drew a clear distinction between bona fide homebuyers and speculative commercial investors. The Apex Court ruled that speculative investors—those who enter real estate projects through assured return or buyback schemes solely for profit rather than physical possession—cannot invoke Section 7 insolvency proceedings as financial creditors. The IBC is intended to protect the fundamental right to shelter for genuine buyers, not to serve as an opportunistic recovery mechanism for commercial investors.

2. (Supreme Court)

Amit Nehra v. Pawan Kumar Garg & Ors.

The Principle: The Supreme Court affirmed that once a homebuyer’s claim has been verified, admitted, and recorded by the Resolution Professional (RP) in the list of financial creditors, it cannot be subsequently rejected or downgraded to a “refund-only” category on technical or procedural grounds. Valid claims remain fully protected.

3. (Supreme Court)

Pioneer Urban Land & Infrastructure Ltd. v. Union of India

The Principle: This foundational ruling remains the bedrock of homebuyer rights under the IBC. The court upheld the constitutional validity of treating homebuyers as financial creditors and clarified that the remedies provided under RERA and the IBC are complementary. Homebuyers can parallelly pursue RERA for individual relief and the IBC for collective insolvency remedies.

Summary Conclusion

The dynamic shifts in insolvency law provide homebuyers with stronger structural levers against defaulting developers. With the introduction of project-wise resolutions and interim possession mandates, the NCLT process is no longer just a tool for financial restructuring—it serves as a viable path toward project completion and asset recovery.

Given the precise threshold metrics and complex procedural requirements involved, coordinating with a skilled insolvency professional or legal counsel is highly recommended before approaching the NCLT.

Conclusion:

So, we can conclude that the Real Estate Buyer can file Insolvency Proceedings against the Real Estate Developer. This article describes all the necessary steps to file an insolvency case against the developer along with case laws and relevant topics. We can also say that the allottees or Real Estate Buyers are considered as financial creditors under the above-mentioned Code. Hence, anyone (home buyers or allottees or real estate buyer) is aggrieved by the developer in real estate sectors can approach to the NCLT in matters of insolvency.

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