Can one unhappy flat buyer file insolvency against a builder?

Yes. Since a 2018 amendment, upheld by the Supreme Court in 2019, money paid by a flat buyer to a builder counts as a 'financial debt'. But to actually start an insolvency case, a group of at least 100 buyers (or 10% of the project's total allottees, whichever is fewer) must apply together. Amounts paid by allottees are deemed 'financial debt' under Section 5(8)(f) since the 2018 amendment Upheld as constitutional by the Supreme Court in Pioneer Urban Land v. Union of India (2019) Homebuyers get a seat and a vote on the Committee of Creditors, weighted by amount paid To file a case, a minimum of 100 allottees or 10% of the project's allottees (whichever is lower) must join together (2020 amendment, upheld in Manish Kumar, 2021) A single unhappy buyer cannot independently trigger insolvency against the builder

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Are Homebuyers Financial Creditors Under IBC?

Short answer: Yes. Since a 2018 amendment, upheld by the Supreme Court in 2019, money paid by a flat buyer to a builder counts as a 'financial debt'. But to actually start an insolvency case, a group of at least 100 buyers (or 10% of the project's total allottees, whichever is fewer) must apply together.

Law: Section 5(8)(f), IBC 2016; Pioneer Urban (2019) · Authority: Supreme Court of India · Status: in force (effective 9 Aug 2019) · Checked 25 Sept 2026

What you need to know

Amounts paid by allottees are deemed 'financial debt' under Section 5(8)(f) since the 2018 amendment
Upheld as constitutional by the Supreme Court in Pioneer Urban Land v. Union of India (2019)
Homebuyers get a seat and a vote on the Committee of Creditors, weighted by amount paid
To file a case, a minimum of 100 allottees or 10% of the project's allottees (whichever is lower) must join together (2020 amendment, upheld in Manish Kumar, 2021)
A single unhappy buyer cannot independently trigger insolvency against the builder

Who this applies to: homebuyers/developers/lawyers

Official / primary source: main.sci.gov.in (government source)

The law behind it

Pioneer Urban v Union of India - homebuyers as financial creditors upheld

The Supreme Court upheld the 2018 amendment to the Insolvency and Bankruptcy Code that treats home buyers who paid money to a builder as 'financial creditors' of the developer, giving them a seat at the table (through the Committee of Creditors) in any insolvency case against the builder, alongside banks and other lenders.

(2019) 8 SCC 416 · in force · source

NCLT Form 1 - Section 7 application by homebuyers (financial creditors)

A group of home buyers (at least 100 allottees, or 10% of total allottees in the project, whichever is lower, per Manish Kumar v Union of India) who together are owed money by a defaulting builder can file Form 1 before the NCLT to start a Corporate Insolvency Resolution Process (CIRP) against the developer as financial creditors, attaching proof of the debt/default and their RERA orders (if any).

Form 1, Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 (Section 7, IBC 2016) · in force · source

Manish Kumar v Union of India - threshold for homebuyers to trigger/continue CIRP upheld

The Supreme Court upheld the 2020 IBC amendment requiring that an insolvency application by home buyers against a builder needs support from at least 100 allottees (or 10% of total allottees, whichever is less) in that project. This prevents a single disgruntled buyer from tipping an entire, otherwise-functioning project into insolvency.

(2021) 5 SCC 1 · in force · source

IBC (Second Amendment) Act, 2018 - Homebuyers Deemed Financial Creditors

This 2018 change was a turning point for homebuyers: money paid to a builder for an under-construction flat is now legally treated as a 'financial debt', putting buyers on the Committee of Creditors alongside banks. Before this, buyers had almost no formal voice if a developer went insolvent.

Act No. 26 of 2018, amending Section 5(8)(f) IBC · in force · source

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