Reverse Insolvency- Legal Remedy to Homebuyers as Group to get the Project Completed


Status as on- 08/10/2020


There has been a delay at the end of the builder for the completion of a real estate project and you, as a homebuyer, do not know what to do? As a homebuyer you have heard from other people how RERA is effective but only to a limited extent and thus, you are looking for other legal options so that the best outcome can be achieved in your situation.

There may be a scenario where the whole project has been scrapped or stuck. What will you do as homebuyers of such a project?

The reason for stalling of a project can be one or many but the real objective for a homebuyer is to get the best possible remedy which protects the interest of all homebuyers of such a project.

Reverse Insolvency

The best legal remedy in such a case is to go through the means of Insolvency and Bankruptcy Code, 2016 [“IBC”]. The homebuyers have been given the status of a financial creditor. Therefore they can file an application for initiation of Corporate Insolvency Resolution Process [“CIRP”] under Section 7 of the IBC. The minimum requirement that you have to meet as group of homebuyers is that the application under Section 7 must be filed jointly by either 100 buyers or 10% of the total allottees of that project.

As a group of homebuyers buyers the best remedy is to first file an application before the National Company Law Tribunal [“NCLT”] under Section 7 of the IBC. Once the application is admitted, CIRP is initiated against the developer/builder. Furthermore, the homebuyers, while filing the application, can also seek initiation of reverse insolvency.

What is Reverse Insolvency?

It is a special procedure brought into picture by the National Company Law Appellate Tribunal [“NCLAT”] in the matter of “Flat Buyers Association Winter Hills – 77, Gurgaon v. Umang Realtech Pvt. Ltd. (through IRP &Ors.)”. This was done by the NCLAT keeping in mind the following difficulties faced by buyers in case developer/builder companies go insolvent. In this case, the primary company, “Uppal Housing Private Limited”, agreed to remain outside the CIRP but acted as a lender to infuse funds in order to complete the project.

This process can be used by the buyers of other such projects where construction has been stalled and buyers can come together in majority to press the builder to infuse funds for completion of the real estate project


This is the best remedy available to buyers, coming together of buyers may seem difficult but that is only one obstacle that they have to cross because after that the construction of the project can be done in a time bound manner. The IBC is much more effective in comparison to RERA. Thus, the homebuyers should explore the IBC route for claiming their rights.

Disclaimer: The above article is based on the interpretation of the related laws and judicial pronouncements. The readers are expected to take legal advice before relying on this article. The author can be reached at or call the IP expert at 8383011629.

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