Best Legal remedy for Stalled Real Estate Project – A Comparison


Status as on 15/09/2020

As per our research, there are more than 5 Lakh homebuyers which are struck in the projects which are either stalled for multiple years or has been abandoned. The builder either don’t have money or intention to start construction on such products. The plight of the homebuyers are increasing day by day. At one side, they have locked their hard-earned money, on another side, the banks are forcing for Pre-EMI or EMI. In many cases, the pre-EMI was to be borne by the builders which are being paid by buyers.

The construction portion of building is being depreciated day by day which is again the loss of buyers.

In such a situation, the current legal system offers three remedies to the aggrieved homebuyer, which are:

  • Filing a complaint under the Real Estate (Regulation and Development) Act, 2016 [“RERA”];
  • Filing a case before the Consumer courts under the Consumer Protection Act, 2019 [“CPA”]; or
  • Approaching the National Company Law Tribunal [“NCLT”] under the Insolvency and Bankruptcy Code, 2016 [“IBC”]. 

Let’s have practical analysis of the all the three legal option (from perspective of a homebuyer) :

When can the case be filed?Upon default in delivery of projectUpon default in delivery of units within due date of deliveryUpon default in handing over the possession of the unit or other deficiency of service by the builder
Who can file?Allottees or co-allotteesAllottees or co-allotteesAllottees who has purchased for residential (non-commercial) purposes
Conditions to file?Upon default in handing over the possession, the application before the NCLT must be filed jointly by 10% of allottees or 100 allottees, whichever is lessAny homebuyer can file upon default in (i) handing over possession; or (ii) Quality issue; or (ii) any other contravention of the provisions of RERAAny homebuyer (being consumer) can file upon default in (i) Possession or (ii) Quality issue or (ii) any other deficiency of service by the builder
Overriding EffectThe IBC has an overriding effect on all legislations including RERA and CPA.  No overriding effectNo overriding effect
Approx. time taken to deliver a verdict2-5 months, depending upon the normal functioning of the NCLT  4-8 months depending upon the normal function of Authority established under RERA2-4 Years depending upon the normal function of tribunals established under CPA
Nature of orderIf default is proved, then IRP is appointed for the company and whole assets and liabilities are taken over by IRP for resolution  If default is proved, an order is passed directing the builder to give possession or give refundIf default is proved, an order is passed directing the builder to give possession or give refund.
Scope for appeal by buildersPromoters of builder company can appeal before NCLAT, but the company shall be handled by the court-appointed IRPAppeal can be filed before RERA Tribunal after depositing 30% of the amountAppeal can be filed before the higher consumer court.
Execution of order or ResolutionIBC requires the IRP to find a bidder for the completion of the project within 180(+90) daysRecovery Certificate [“RC”] can be issued under Land and Revenue Act. However, the RC has to be enforced by a Magistrate (who can take up as much time as he likes for the enforcement of RCRC can be issued under Land and Revenue Act, and same problem mentioned before will arise
Likelihood of success (based on experience)99%20%10%
Challenges to Homebuyers(i) Min. 10% of total allottees required (ii) Appointment of a good Advocate (iii) Finding an efficient IRP(i) Getting order of refund (ii) Execution of order (iii) Some projects are not even registered under RERA (iv) Generally, the builder does not obey the orders(i) Difficult to prove that the allotted unit will be used for commercial purposes (ii) Getting order of refund (iii) Execution of order (iv) Generally, the builder does not obey the orders
Challenges/Risk to Builder company(i) The builder will end up losing the ownership of the project, along with all its assets. A new builder will be responsible for the timely completion of the project (ii) The builder will not be able to re-gain the ownership of his company (iii) The builder will be subjected to forensic audit and other scrutiny to find fraudulent conduct/transactions by the builderExecution of orderExecution of order


Based on the above analysis, it can easily be concluded

  1. IBC offers the best solution to aggrieved homebuyers of projects which are delayed or abandoned by the builder. IBC through NCLT revive the whole project/company.
  2. RERA is suitable for the projects where project is being constructed with small delay or there when there are any other discrepancies in relation to demand notices and payment schedules.
  3. Consumer court is suitable only for projects which would fall outside the scope of RERA.

Disclaimer- The above article is based on the personal experience of the author & its team in the respective fields of laws. The personal interpretation may differ from person to person depending upon the experience. The readers are expected to take expert opinion before relying the above article. The author can be reached at 8383011629 or

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