Application Filing by the Home Buyers/Allottees under IBC, 2016

threshold-of-home-buyers-for-IBC application-filing-by-the-homebuyers-under-ibc 

Status as on- 21/03/2022


The Insolvency and Bankruptcy Code, 2016 (IBC) includes the amount raised by the home buyers or an allottee in a real estate project within the ambit of financial debt, thereby giving the allottees the position of financial creditors. Though the Supreme Court of India has upheld the constitutional validity of this amendment in the case of “Pioneer Urban Land and Infrastructure Ltd. V. Union of India,” in Writ Petition (Civil),no. 43 of 2019. By way of this judgment, a large number of applications were received by the NCLT, thereby creating huge burden over NCLT and disrupting the real estate sector.

Later, the amendment was introduced in Section 7(6) of IBC which mentioned the requirement for filing of application for initiating Corporate Insolvency Resolution Process. It stated that the application for initiating CIRP must be filed jointly by at least a hundred number of allottees or one-tenth of the total number of allottees in the same real estate project, whichever is less.

Prerequisites for initiating CIRP

The IBC has notified two thresholds which significantly impacted the real estate sector. It mentioned the conditions for initiating insolvency resolution process:

  • The minimum amount for threshold of default was increased from Rs. 1 lakh to Rs. 1 crore.
  • The minimum numerical threshold requirement for allottees must jointly be at least one hundred or one-tenth of the total allottees of the same project, whichever is less.

Calculation of total default amount

The threshold of Rs. 1 crore means the total default of the corporate debtor to any financial creditors and not necessarily only to the applicant allottees. Thus, the allottees can move against the developer or the promoter even if no amount is due to them, provided that they meet the numerical threshold requirement mentioned under Section 7(6) of IBC.

Calculation of numerical threshold of allottees

The term ‘allottee’ is described under Section 2(d) of the RERA Act, which states that an allottee is a person to whom a plot, building or apartment is allotted by sale, transfer or otherwise by the promoter of the project or any other subsequent owner.

For the purpose of calculation of the total number of allottees, only the number of allotted units in a project shall be considered, irrespective of the units constructed. Also, in case of joint allotments, wherein a single unit is allotted to more than one person, the joint allottees of that unit shall be considered to mean a single allottee.

Rights of the home buyers after the commencement of CIRP

As mentioned above, the home buyers are covered in the ambit of financial creditors hence they have the same right as the financial creditor such as to be a member in the committee of creditors, participation in the distribution of the assets, participation and voting rights in the meeting. After initiation of the CIRP, it is the duty of the Resolution Professional to keep the company a going concern and in the case of real estate project, the RP has to make sure that the flats/ apartments are to be completed. This statement was provided by NCLAT in the case of Flat Buyers Association v. Umang Realtech Pvt. Ltd. through IRP & Ors., Company Appeal (AT) (Insolvency) No. 926 of 2019.


The changes introduced in the notification and the amendment in the IBC has brought much needed clarity and provided the much-needed right to the home buyers/allottee. In this way, the interest of the allottees is protected and the survival of real estate companies and completion of projects is ensured.

Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinion before relying upon the article. For more information, please contact us at


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