When a Builder Is Insolvent: What Bangalore Home Buyers Can Claim at the NCLT
When a builder is called before the NCLT, India's company law tribunal, flat buyers in Bangalore are left with many questions. Work has usually slowed, payments are unclear and nobody knows who now decides what happens to the project. The answers below follow the 2016 insolvency law (the IBC) and cover standing, the claim, the link with RERA and the 2026 amendments.
Does a Buyer Have Any Standing?
Yes, and a strong one. In 2018 Parliament changed clause (f) of section 5(8), so an allottee's payment towards a housing project now counts as financial debt. That makes each buyer a financial creditor, a status the Supreme Court upheld in the case of Pioneer Urban Land and Infrastructure, decided in August 2019.
Financial creditors form the committee of creditors, the body that picks the resolution plan. Buyers take part as one class, with the lenders to the builder.
Voting without attending meetings
Because hundreds of people cannot attend, the tribunal names one representative to act for the buyers. Before every meeting this person collects votes and then casts the class vote the way most voting buyers wanted. Staying silent does not free a buyer from the outcome, so voting each time is the safer course.
How Does the Process Begin?
A default of at least Rs. 1 Crore is what lets the tribunal admit an application. For companies registered in Karnataka the Bengaluru bench decides. After admission the directors lose control, and a professional manages the company through what is called the corporate insolvency resolution process (CIRP).
Three effects follow at once:
- Section 14 brings a moratorium, which suspends suits and recovery steps against the company
- The interim resolution professional makes a public announcement and asks every creditor to claim
- A creditors' committee is set up to vote on a revival plan or, failing that, on liquidation
The code allows 180 days, with a single 90-day extension, and a ceiling of 330 days counting litigation. Housing cases tend to run past that, since each involves landowners, lenders and a large body of buyers.
Who May File Against the Builder?
A lone buyer cannot. Following the 2020 amendment, allottees need either 100 of their number from one project or 10% of that project's allottees, whichever is fewer. In the Manish Kumar case, decided on 19 January 2021, the Supreme Court endorsed this rule.
Numbers from separate projects of a single builder cannot be pooled. A buyer holding a RERA refund order is still counted, as the Supreme Court confirmed in October 2023 in the Vishal Chelani case.
How Is a Claim Made?
The public announcement lists the professional's name, a cut-off date and the claim forms. Buyers submit Form CA as a class, normally by email or on an online portal, claiming what they paid and the interest their agreement allows.
Start collecting papers early. A useful folder holds the sale agreement and allotment letter, receipts with bank statements, and the builder's demand notices. It should also have the loan sanction and disbursement papers and any order from RERA or a consumer forum.
The first cut-off is usually only 14 days from the interim professional's appointment. Later claims are taken for a limited time, but one filed once the creditors have cleared a plan may be refused. Accepted claims are listed in the register of creditors that the professional publishes.
RERA Versus the IBC
A RERA case concerns a single project and a single grievance, and the authority may direct a refund with interest, compensation or completion. The IBC covers the whole company and all of its debts. Because section 238 makes the IBC prevail, the moratorium freezes a RERA complaint that is pending and any attempt to recover an earlier RERA order.
This comparison shows the main differences:
| Question | RERA route | IBC route |
|---|---|---|
| Minimum applicants | One allottee | 100 buyers, or 10% of the project if that is fewer |
| Decided by | Karnataka RERA | NCLT at Bengaluru |
| Possible result | Refund plus interest, compensation, or completion of the flat | Revival of the company or a project through a plan, or liquidation |
| Management | Promoter stays in charge | Resolution professional takes over |
When a late project belongs to a builder that can still pay, RERA is normally the faster route. Insolvency suits a builder with no money left. Since the sequence of the two affects what a buyer gets back, advice from a lawyer practised in NCLT matters is wise.
What Is New in 2026?
Amending legislation for the code passed in 2026, and the President gave assent on 6 April. Most of it was put into force by a notification of 25 May 2026. A wider meaning of resolution plan lets separate bidders buy separate assets of one company, which favours reviving a builder's projects one at a time.
Earlier changes point the same way. Since February 2024 each project of an insolvent builder has needed a bank account of its own. Flats may also be handed over while the process continues, with the committee's approval.
The IBBI published a discussion paper on 30 June 2026 about real estate cases. It suggests a simpler claim form, unit and construction disclosures for each project, and a place for buyers' representatives on the body that watches an approved plan. These are ideas only until the regulations change.
What Might Buyers Receive?
A frequent good result sees a fresh developer or investor take the project over and complete it. Handover comes late, and buyers may be asked to forgo delay interest or pay an updated cost. A buyer seeking a refund could be offered less than was paid.
Liquidation is the weakest ending. Section 53 places allottees among unsecured financial creditors. They are paid only after the costs of insolvency, wages owed to workmen and secured lenders have been met. For this reason most buyers' groups favour plans that finish the building.
A Short Plan of Action
Warning signs include a site where work has stopped, contractors who are owed money and RERA deadlines that pass. When these appear, buyers should take the following steps in order:
- Form or join the allottees' association and keep a joint record of who paid what
- Read the project's record on the state RERA portal, including extensions and complaints
- Look through the tribunal's cause lists and the IBBI site for any case against the builder
- File the claim before the cut-off date and attach every proof of payment
- Vote through the representative, and read each plan for its completion timeline
- Inform the lender, and keep paying the EMI unless the bank confirms a change in writing
The loan is a separate contract with the bank, so it runs on during insolvency and a missed instalment spoils the credit record even if the flat is late. For the RERA status of a project listed with us, write through the contact page.
