Status as on- 08/10/2020


The project in which you bought a house or property has been scrapped or stalled. In simple words, you have handed over your hard earned money to the developer or builder. Now, years have passed but there is no hope of you getting the possession of the property anytime soon.

You have tried chasing the builder and have run from pillar to the post, yet you do not see any hope of getting the house. There may be a scenario where the builder has gone to jail or has misused the money and is nowhere to be found. In such cases the housing projects are either stalled or scrapped completely.

What is the legal recourse available to you? What can a homebuyer do to claim his/her money or property?

The answer to this question is remedy under two recent laws, i.e., Real Estate Regulation and Development Act, 2016 [“RERA”] and the Insolvency and Bankruptcy Code, 2016 [“IBC”].


The first remedy available to the homebuyers is under Section 8 of RERA, which was enacted by the Legislature keeping in mind such situations where projects have been left hanging in between by the builders. This Section gives powers to the RERA Authority to find a solution for taking steps to complete the construction of stalled projects with the consultation of the State Government. Under this rehabilitation route, either the State Construction Company can complete the construction (take completion of Amrapali projects by the NBCC, for instance) or the Association of the Buyers of a particular project can also take over the project and under the monitoring of the RERA Authority complete the Project by themselves.

This has been done in case of “Piyush Heights Resident Welfare Association Vs. Piyush Buildwell India Limited” by the Haryana RERA. In this case, the association of homebuyers was made responsible for the completion of the project in a time bound manner.


Another remedy available to the homebuyers is to seek remedy under the reverse insolvency process provided under the IBC. Initially the homebuyers buyers were not covered under the provisions of IBC but later their status was recognized under the code as Financial Creditors”. Therefore, in a situation where a project is stalled then either 100 buyers of the project or 10% of the total allottees of a project can approach the NCLT under Section 7 of the IBC.

Now, once the petition is admitted, Corporate Insolvency Resolution Process [“CIRP”] would be initiated against the developer in which the management of the company including the directors are replaced by a well-qualified and efficient person i.e. Resolution Professional who will then look into day to day affairs of the Company. The IBC does not talk about the concept of Reverse Insolvency but the same has been developed by the National Company Law Appellate Tribunal [“NCLAT”] specifically for developer/builder Companies. Under the reverse insolvency route, the opportunity to complete the project is given to the developer company by infusing funds and thus, it acts as a win-win situation for the buyers and developer as buyers get the delivery of property in a time bound manner and the developer gets to save his interest in the Company.


Now, the question that will come to your mind is which one is better? The answer is obviously IBC as it is more efficient, quick and casts more liability on the shoulders of the developer/builder. The most effective reason for choosing IBC over RERA is that proceedings under IBC are in form of execution which means they are in form of implementing the decision of the court whereas under RERA or consumer after you get final decision and if builder does not comply then you have to go for execution proceedings which is another round of litigation to enforce your 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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