What happens if a builder becomes insolvent before giving the possession of the flats over to the buyers?


If a builder is declared insolvent, IBC provides two options- resolution or liquidation. The resolution process will involve an analysis of the builder’s financial position to see if the business can be rescued or revived. If the first option is not viable, the builder’s assets will be liquidated and the proceeds will be used to clear the creditor’s claims. It should be noted that IBC is aimed at protecting the rights of operational and financial creditors, and buyers are considered neither.

The legislation does not have any clauses pertaining specifically to the rights of a home buyer when the deveoper becomes bankrupt. Once a builder files for insolvency, The National Company Law Tribunal will appoint an insolvency resolution professional who will attempt to resolve the builder’s financial situation. If a revival is not possible, he will verify the claims of creditors, and oversee the liquidation and settment process.

Buyers may use Form F issued by the Insolvency and Banruptcy Board of India to raise their claims, which can be for the refund of the amount they had invested in the builder’s project, the damages suffered by them due to the non-execution of their purchase agreement, or for receiving possession of the property they had paid for.

Reference: Insolvency and Bankruptcy Code, 2016



Ask FREE question
Ask Question
Eg - Start with How, Why, What, Should I, When will...? etc
Thank you.  Please share the below details
* If you are outside India, mention WhatsApp Number with Country Code
Place of Property / Employment / Legal Issue / Residence / Your City