How can homebuyers claim as financial creditors when a builder company goes insolvent?

Question

My builder's company has been admitted into insolvency proceedings before the NCLT. Can I as a flat buyer claim my money back as a financial creditor? I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

How can homebuyers claim as financial creditors when a builder company goes insolvent? is governed in India primarily by Insolvency and Bankruptcy Code 2016, Section 5(8)(f), Insolvency and Bankruptcy Code 2016, Section 7 and Insolvency and Bankruptcy Code 2016, Section 21. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 5(8)(f) of the Insolvency and Bankruptcy Code 2016, inserted by the 2018 amendment, deems amounts raised from allottees under a real estate project to have the commercial effect of borrowing, making every homebuyer a financial creditor of the promoter company.

As a financial creditor, a homebuyer can file an application under Section 7 of the IBC before the National Company Law Tribunal to trigger the Corporate Insolvency Resolution Process, or submit a claim if the process has already been initiated by another creditor.

Section 21 requires the Committee of Creditors to include allottee representation, and for real estate projects, allottees typically vote through an authorised representative who casts votes based on the collective voting share of the allottee class.

Homebuyers must file their claims in the prescribed form with the Interim Resolution Professional within the timeline set out in the public announcement, supported by the agreement for sale, payment receipts and any RERA order already obtained.

A resolution plan approved by the Committee of Creditors and the NCLT can restructure the promoter's liabilities, and homebuyers may receive possession of completed units, partial refunds, or an equivalent unit in a revived project, depending on the plan's terms rather than a guaranteed full refund.

What to do next: 1) Check the NCLT cause list or the corporate insolvency public announcement for your builder's company; 2) File your claim as a financial creditor with the Interim Resolution Professional within the notified deadline; 3) Participate through the allottees' authorised representative in Committee of Creditors meetings; 4) Retain a copy of any RERA order already passed in your favour to support your claim amount.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Insolvency and Bankruptcy Code 2016, Section 5(8)(f) carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.