India’s decade-old insolvency system is shifting its focus from lenders to becoming a lifeline for the ordinary citizen – the homebuyer
The Insolvency and Bankruptcy Code (Amendment) Act, 2026, passed by the Lok Sabha on March 31 and given Presidential assent earlier this month, is the best thing that could have happened to the resolution process.
The prolonged insolvency of realtor Jaypee Infratech Ltd (JIL) is a prime example of homebuyers’ plight in the complex resolution process, involving multiple stakeholders, under the Insolvency and Bankruptcy Code (IBC).
The Corporate Insolvency Resolution Process (CIRP) started in August 2017, when the IDBI Bank-led expressway and township developer, Jaypee Infratech, filed an insolvency application after defaults of about Rs 8,000 crore, leaving close to 20,000 homebuyers in legal limbo.
In March 2023, after multiple resolution plans failed, as creditors and homebuyers rejected proposals they deemed unfair, the National Company Law Tribunal (NCLT) approved a resolution plan from Mumbai-based Suraksha Group, which garnered 98.66 per cent vote in the Committee of Creditors (CoC). The homebuyers, with 58 per cent voting share, played a key role here. They ensured that project completion was included in the resolution. It was the first such incident in a large real estate CIRP.
The plan promised an upfront payment of about Rs 1,300 crore to financial creditors, along with land and non-convertible debentures. For the homebuyers, the relief lay not in the money but in the promise of possession. The Suraksha plan stated that flats in the stalled townships would be built and delivered within 42 months. Construction has already resumed on 97 unfinished towers, and according to the implementation schedule, the first batch of flats would be ready by December 2027, bringing a closure to the project after a decade.
The appellate body, NCLAT, has also directed additional payouts of about Rs 1,334 crore to address claims from the Yamuna Expressway Industrial Development Authority and the farmers who sold their land for the project. All key stakeholders — including homebuyers and farmers — have been included in the solution, setting a precedent for homebuyer-led CoCs and project-specific real estate resolutions under the IBC. Retail homebuyers, often powerless against large builders, can now collectively influence decisions at the restructuring table.
Finance ministry data shows that 162,000 homebuyers have received possession through 111 resolved real estate insolvency cases since June 2018, and about 90,000 are part of 210 ongoing cases. Of these, 87 are awaiting NCLT approval of resolution plans that could benefit nearly 50,000 homebuyers.
While the Jaypee saga illustrates the homebuyers’ collective strength, the Supreme Court’s decision in Amit Nehra & Another vs Pawan Kumar Garg & Others solidifies protection of individual flat buyers caught in CIRP technicalities.
In this case, the buyer had bought an apartment in the IREO Rise (Gardenia) project in Sector 99, Mohali, developed by Puma Realtors Pvt Ltd, after completing formalities between 2010 and 2011, signing an agreement for Rs 60.06 lakh and paying Rs 57.56 lakh. However, possession was never given. CIRP was admitted against the developer in October 2018, the consumer complaint was dismissed, and the flat buyer was pushed into the insolvency process with other creditors. The resolution professional (RP) later accepted the claim of Rs 57.56 lakh as a financial debt and included it among financial creditors.
However, the approved resolution plan included a clause that said “belated, unverified claimants” would receive only 50 per cent of refund, with no right to possession. Both NCLT (July 2023) and NCLAT (January 2025) accepted this and denied the flat owner the apartment and offered half of the money deposited, despite the claim being verified and accepted.
On September 9, 2025, the Supreme Court overturned both NCLT and NCLAT orders, saying once a homebuyer’s claim has been verified and accepted by the RP, it cannot be labelled as a belated claimant. The court emphasised that homebuyers who have paid substantial amounts well in advance cannot be treated as mere refund seekers, and that this approach contradicts the IBC’s aim to maximise value and protect genuine stakeholders. It ordered the execution of the conveyance deed and the delivery of the specific apartment within two months.
All of this demonstrates that India’s decade-old insolvency system is finally shifting its focus from lenders to becoming a lifeline for the ordinary citizen – the homebuyer battling powerful builders, bankers, and politicians.
The court’s decision apart, the 2026 IBC amendment illustrates how this complicated legal framework now provides quicker resolutions for homebuyers long awaiting possession.
The amendment has eliminated the seldom-used fast-track insolvency process and introduced a new creditor-initiated resolution mechanism – a hybrid and partly out-of-court mechanism.
In the new framework, specified financial creditors holding more than 51 per cent of the outstanding debt can initiate a structured insolvency process through a public announcement and coordinated actions, instead of waiting for NCLT admission to start commercial negotiations. The debtor and its current management maintain control of day-to-day operations during this phase, but an insolvency professional supervises – and can exercise – veto powers, creating a “debtor-in-possession, creditor-in-control” model that aligns with global standards.
The process has a time limit: A base period of 150 days for drafting and approving a resolution plan, with one possible extension of 45 days. If no viable plan emerges within this timeframe, creditors can request a conversion into a traditional CIRP before the NCLT.
Each stage has a timeline. Once default occurs and the legal requirements are met, the NCLT must accept an insolvency application. The 14-day window for admission, already existing in the code, is now being enforced strictly, with penalties for failure to comply. The days of indefinite hearings are over.
The 330-day outer limit for completing CIRP, introduced in earlier amendments, is strengthened with new rules that discourage frivolous lawsuits and delays. There will be penalties for violating moratorium conditions and breaching plans, replacing slow criminal sanctions. The CoC needs to give detailed reasons when selecting a resolution applicant. This improves transparency and makes it harder to challenge approved plans on flimsy grounds. Also, insolvency applications cannot be withdrawn once filed and accepted until the CoC is formed, closing a loophole that promoters often exploited to stall creditor-backed cases at the last moment.
All these should help reduce the nearly 30,000 pending NCLT cases, particularly if high-volume, mid-sized defaults can be managed out of court.
The amendment brings in a long-awaited legal framework for group insolvency and cross-border cooperation. This allows multiple companies in the same corporate group to be resolved together, and enables Indian courts to recognise and work with foreign insolvency cases. This is particularly important for large real estate and infrastructure groups with complicated networks of special purpose vehicles and foreign creditors.
In addition to structure and timelines, the amendment also gives clarity to how different classes of creditors should be treated. Dissenting financial creditors are assured a minimum payment under any resolution plan, reducing legal risks and providing certainty to minority lenders. At the same time, assets of personal guarantors are clearly tied to the CIRP of the main debtor. This makes it easier for creditors to enforce guarantees in an organised manner instead of filing lawsuits.
For individual stakeholders, such as homebuyers, the combined impact of new laws and court rulings is significant. When homebuyers are recognised as financial creditors and their claims accepted, they cannot be pushed to a lower status in the resolution plans. The code is no longer just a tool for banks but a means for ordinary citizens to enforce contracts against powerful developers.
For the record, since its inception in 2016, the IBC has resolved over 8,300 corporate debtors through the CIRP, and about 61 per cent of these cases have been settled through successful plans, withdrawals, or liquidations, as of March 2025. Financial creditors have recovered around Rs 3.9 trillion through approved resolution plans, while another Rs 13.8 trillion of stressed exposure has been settled even before the cases were filed at NCLT.
aniltikotekar4sme.com 