When the Builder Goes to the NCLT: A Bangalore Buyer's Guide to Insolvency and RERA

Waiting years for a flat is hard enough, and a builder's insolvency adds a legal maze. Buyers in Bangalore face it when the tribunal for company cases, the NCLT, takes up a case against the firm that holds their money. This guide follows the sequence of events under the 2016 insolvency law (IBC), with the buyer's position at each step and what 2026 brought.

Why a RERA Complaint Is Not the Same Thing

A RERA complaint is about one project. The Karnataka authority may order the money back with interest, award compensation or direct completion, and the promoter keeps running the business throughout. Any single buyer can file.

The IBC is aimed at the entire company and all its dues. Section 238 gives it priority over other laws, so when insolvency starts, a pending RERA complaint is paused, and so is the recovery of an earlier RERA order. Control passes to a resolution professional, and the end is either a rescue plan covering the company or a project, or liquidation.

For a delayed project whose builder is still able to pay, RERA is usually the more direct choice. Insolvency exists for builders who have run out of money. As the order in which the two routes are used can change recovery, a lawyer experienced in NCLT work should be consulted.

From Admission to Resolution

What the code calls CIRP, the resolution process, starts when the NCLT accepts an application that proves a default of at least Rs. 1 Crore. Companies registered in Karnataka are heard at the Bengaluru bench. The board is pushed aside, and a professional trained in insolvency takes over the company.

In the first days the interim professional publishes a notice inviting claims, and the section 14 moratorium halts suits and recovery against the company. Creditors then form a committee, which later votes on a rescue plan or, if none works, on winding up the company.

The statutory clock is 180 days, extendable once by 90, with a hard stop at 330 days counting litigation. Property cases often go beyond that, as every project carries landowners, banks and many buyers.

Buyers as Financial Creditors

Since 2018, the code has counted a buyer's payments towards a housing project as financial debt, under section 5(8)(f). The Supreme Court accepted the amendment in its August 2019 judgment in the Pioneer Urban Land and Infrastructure matter. Buyers therefore hold a place in the creditors' committee as a single class next to the banks, and that committee picks the plan.

A representative appointed by the tribunal attends for the class, gathers opinions ahead of every meeting and then votes the way most participating buyers decided. Buyers who stayed silent are bound as well.

Can Buyers Start the Case?

A single buyer cannot. Under the 2020 amendment at least 100 allottees of a single project must apply together, or 10% of that project's allottees when that figure is smaller. The Supreme Court upheld the threshold on 19 January 2021 in the Manish Kumar case.

Allottees from two different projects by one builder cannot combine. A buyer already holding a RERA refund order is still counted. The Vishal Chelani decision of October 2023 held that such a buyer stays a financial creditor.

Lodging a Claim

The public announcement is the starting point, as it names the professional and gives the last date and the forms. Buyers claim as a class on Form CA, usually by email or on a portal, for the sums paid and interest owed as per their agreement.

Papers worth keeping from booking day onwards include:

• The registered sale agreement and the allotment letter
• Payment receipts matched to bank statements
• Every demand notice and email the builder sent
• The lender's sanction and disbursement documents
• Any RERA or consumer commission order

The initial deadline is generally a fortnight from the day the interim professional is appointed. Late claims remain possible for some time, but a new claim may be rejected once creditors have approved a plan. Accepted claimants appear in the list the professional publishes.

Amendments Made in 2026

An amending Act for the code won the President's assent on 6 April 2026, and most of its provisions came into force on 25 May 2026 through a notification. Plans can now be proposed for parts of a company, so different bidders may take different assets. This helps a builder with many projects, since each project can be revived separately.

Regulations already ask for a distinct bank account for every project of an insolvent builder, a rule in place since February 2024. They also allow flats to be delivered during the process if the creditors approve.

A discussion paper from the IBBI, dated 30 June 2026, goes further. It floats an easier claim form, a report for each project on units sold and construction progress, and a seat for buyers on the committee that supervises a plan. Only a change in the regulations will make these binding.

Realistic Outcomes

The good outcomes mostly take one form, in which a new developer or investor completes the flats under an approved plan. Delivery is late, and the plan may ask buyers to waive delay interest or accept a revised price. A buyer who prefers a refund may receive less than the payment made.

The worst case is liquidation. Section 53 treats allottees as unsecured financial creditors, who are paid last among these classes: after insolvency costs, workmen's dues and secured lenders. This explains why groups of buyers normally support a plan that finishes construction.

Steps for a Buyer in a Distressed Project

An idle site, contractors who have not been paid and missed RERA dates warn of trouble. At that stage a buyer can protect the position by taking these steps:

• Join the association of allottees, or start one, and share a record of buyers and amounts
• Read the project's entry on the Karnataka RERA portal for deadlines, extensions and complaints
• Monitor tribunal cause lists and the insolvency board's website for any application against the builder
• Submit the claim by the deadline, with every proof of payment
• Cast votes through the representative on each plan, noting its completion schedule
• Inform the lender and keep the EMI going, unless the bank agrees a change in writing

The home loan does not pause with the builder's case, and a skipped instalment harms the credit score although the flat is late. Our team can tell buyers the RERA status of projects listed on this site; ask through the contact page.