Small Group of Home Buyers Can’t Seek Bankruptcy Proceedings Against a Defaulting Real Estate Company

The government is all set to lower the threshold of buyers which would be needed to begin bankruptcy proceedings. The rule has been dictated going by how some homebuyers misuse insolvency proceedings and in the wake of the incidences where some home buyers are seeking strict action against real estate companies.

It is to be noted that recently many incidences have been registered where a single home buyer, who could be a speculative home buyer, made efforts to dislocate a well-operated and well-known real estate company.

Injeti Srinivas, corporate affairs secretary, recently spoke about the issue at Insolvency and Bankruptcy Board of India’s 3rd annual function. He said that of late, many cases of this kind have been registered in Mumbai revolving around many leading real estate companies. These cases need to be considered from a fresh perspective.

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Early this year, the Supreme Court ruled out that the right of home buyers will stay equivalent to the lenders which will make them the financial creditors. Moreover, the apex court supports the home buyer’s ability to take a real estate developer into a bankruptcy proceeding. There is updated information available about legally preventing home disclosure for more information.

A three-judge bench, which was headed by Justice Rohinton F Nariman stated that if a home buyer initiates default before the bankruptcy court, it is the responsibility of the builder to prove to the court that consumer doesn’t want to take their house’s possession in order to avoid proceedings.

Further throwing light on the matter, Srinivas said that the government is still working on making the personal insolvency laws operational. The process is being worked upon in phases. The entire process may take a complete year to become functional. He further adds that the bankruptcy process for personal warrantor to the corporate debtor is in its final stage. In the next step, relief will be provided to some small borrowers who cannot repay the debt. It is noteworthy that the process is going to take about four to six months to become operational. After this, the process of proprietorship and partnership along with some other matters will be worked upon.

For small defaulters, the process will be non-adjudicating. It will be a completely online system to guarantee the accuracy of the application, as well as a person’s assets, along with other things.

Srinivas adds that bodywork based on the UNCITRAL Model Law for cross border insolvency is all set to be adopted by the Parliament in the coming winter session. It is to be noted that in cross-border insolvency, the defaulting company owns assets in multiple countries or where the company’s creditors aren’t from the same country where the proceeding is happening. He also says that the government is working on the bodywork for group insolvency.

According to the corporate affairs secretary, the government wants to inculcate a marketplace for assets to encourage maximum participation, as well as competition, of foreign investors. The establishment of this kind of marketplace will lead to a discernment of maximum value for the assets. This will also bring the best people on board to run these large companies.

Shruti Gupta
Shruti Gupta is a writer and digital marketing consultant at She has a passion for technology, startups and other business topics. She lives and breathes digital marketing, and has contributed to a number of famous websites. Her aim is to spread her thought-provoking ideas to all generations.