Homebuyers of Projects Facing Insolvency Can Claim Possession

For years, thousands of homebuyers in India have found themselves trapped in stalled housing projects where builders either defaulted or entered insolvency proceedings. Despite paying almost the entire sale consideration, many were left with little hope of securing possession of their dream homes. A recent Supreme Court ruling has now shifted the tide, bringing long-awaited relief.

The Court held that homebuyers in projects facing insolvency are entitled to possession of their apartments if their claims have been verified and admitted by the resolution professional. This ruling not only addresses the plight of individual buyers but also sets a strong precedent for similar cases across the country. It raises an important question: will this decision finally tilt the balance of justice in favour of homebuyers who invested their life savings in unfinished housing projects?

The Supreme Court’s Landmark Ruling

The judgment arose from the Ireo Rise (Gardenia) project in Mohali, developed by Puma Realtors Private Limited. Two buyers had booked an apartment back in 2010 and paid nearly the full consideration amount of ₹60 lakh by 2011. Yet, despite honouring their side of the agreement, they never received possession. Matters worsened in 2018 when insolvency proceedings were initiated against the developer.

When the case reached the Supreme Court, the bench comprising Justices Sanjay Kumar and Satish Chandra Sharma ruled in favour of the buyers. The Court observed that once a claim is verified and included in the list of financial creditors, it carries full legal recognition under the Corporate Insolvency Resolution Process (CIRP). Consequently, the buyers were entitled to possession, not just a partial refund. The Court directed the builder to execute the conveyance deed and hand over possession within two months.

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Why This Case Matters

While the dispute itself involved just two individuals, the implications are far-reaching. Across India, thousands of families are stuck in projects facing insolvency. They have paid nearly the entire purchase price but are unable to secure possession due to legal and procedural hurdles.

Until now, many such homebuyers were often treated as unsecured creditors, left to claim only partial refunds or compete with financial institutions for settlement. By recognising possession as a legitimate right for verified claims, the Supreme Court has reinforced the principle that a buyer’s investment is not just financial but also a matter of shelter, security, and dignity.

This ruling ensures that homebuyers are no longer sidelined as secondary claimants but are given priority when their claims are legally validated.

What the NCLT and NCLAT Held Earlier

The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) had earlier ruled against the buyers. Their interpretation limited the petitioners to only a 50% refund, citing the fact that the claim was received after the Committee of Creditors had approved the resolution plan in 2019.

These tribunals treated the buyers under Clause 18.4(xi) of the Insolvency and Bankruptcy Code (IBC), which deals with delayed or unverified claims. However, the Supreme Court strongly disagreed with this approach. It clarified that there is a clear distinction between:

• Clause 18.4(vi)(a) – covering verified and admitted claims, which entitle homebuyers to possession.
• Clause 18.4(xi) – covering belated or unverified claims, which may only lead to refunds.

By misclassifying the petitioners, both NCLT and NCLAT deprived the buyers of their rightful relief. The Supreme Court’s intervention corrected this misapplication of the law.

The Supreme Court’s Reasoning

The bench observed that denying possession despite a verified and admitted claim would cause “unfair and unwarranted prejudice.” The Court emphasised that homebuyers often invest their entire life savings into these properties with the expectation of securing a roof over their heads. To reduce such claims to refunds, especially when they were verified well before the resolution plan’s approval, defeats the spirit of the IBC.

Accordingly, the Court ordered that the conveyance deed be executed and the buyers handed possession of their apartment within two months. This reasoning sends a strong message: the legal framework must protect genuine buyers, and procedural delays cannot be used to deny them justice.

Implications for Homebuyers in Projects Facing Insolvency

The ruling provides a significant boost for homebuyers across India who are caught in similar circumstances. Its implications are wide-ranging:

1. Verified claims mean possession – Once a claim is recognised by the resolution professional and included in the creditors’ list, buyers can demand possession, not just refunds.
2. Precedent for stalled projects – Thousands of stalled housing developments undergoing insolvency proceedings may now see similar reliefs for genuine buyers.
3. Increased buyer confidence – The decision reassures potential homebuyers that their rights will be protected even if a builder defaults.
4. Accountability for developers – Builders and resolution professionals are now bound to honour verified claims, adding a layer of accountability.

This landmark decision shifts the narrative: homebuyers are not just financial creditors but rightful allottees entitled to their homes.

Challenges Ahead

Despite the positive outcome, challenges remain in implementing this principle across all projects facing insolvency.

• Limited assets – In many insolvency cases, developers may not have sufficient funds or completed units to hand over possession.
• Infrastructure gaps – Even when possession is granted, buyers may face delays in receiving basic amenities like water, electricity, and occupancy certificates.
• Verification hurdles – Buyers must ensure their claims are submitted correctly and on time to be recognised as verified claims.
• Balancing creditor interests – The IBC framework must still balance the interests of banks, financial institutions, and other creditors alongside individual homebuyers.

For the ruling to truly transform buyer protection, systemic reforms are needed to strengthen claim verification processes and ensure the timely delivery of homes.

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Conclusion

The Supreme Court’s ruling marks a turning point in protecting the rights of homebuyers in projects facing insolvency. By upholding the principle of possession over partial refunds, it delivers justice to those who have invested their life savings in the hope of owning a home.

This case is more than just a win for two petitioners in Mohali it sets a nationwide precedent. Verified claims will now carry the weight they deserve, forcing developers and resolution professionals to prioritise buyers’ rights. While challenges remain in execution, the decision restores confidence in India’s housing and legal framework.

For homebuyers, it is a reminder that persistence pays, and justice, though delayed, can still safeguard their dream of a home.