Real Estate Industry

Home buyers can start bankruptcy cases against errant builders


From UPSC perspective, the following things are important :

Prelims level : Details of the bill

Mains level : Nothing much


Supreme Court upheld the validity of the Insolvency and Bankruptcy Code (Second Amendment) Act which empowered harassed home buyers to initiate bankruptcy proceedings against errant real estate builders.


  1. Many real estate builders have been under fire for incomplete projects leaving home buyers in dire straits.
  2. The Act had brought the home buyers on par with the creditor banks of the property builder.
  3. Before the Amendment Act of 2018 came into existence, the assets of the bankrupt builder were divided among his employees, creditor banks and other operational creditors. Home buyers had hardly figured.


  1. The builders argue that home buyers were already armed with the Real Estate (Regulation and Development) Act (RERA).
  2. SC reasoned that IBC and the RERA operate in different spheres and can be used harmoniously.
  3. IBC deals with the replacement of the bankrupt builder and lead to a resolution plan. The RERA’s purpose is to protect individual home buyers by requiring the promoter to strictly adhere to the purchase deal and complete the project within a stated period.
  4. As home buyers were a large, amorphous group, their presence in the CoC would be a nuisance. But, home buyers finance from 50% to even 100% of a housing project. Their absence from the CoC and denying them a voice on future plans would be “manifestly arbitrary.”
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