News: NCLT Mumbai: Insolvency Plan Overrides Buyer’s RERA Refund-16-09-2026
Individual homebuyers cannot press for a refund under the Real Estate (Regulation and Development) Act (RERA) when that claim conflicts with an insolvency resolution plan approved by a majority of homebuyers, the Mumbai bench of the National Company Law Tribunal (NCLT) has held in a recent order. The tribunal also said a new developer taking over a stalled project through insolvency cannot necessarily be made to honour every contractual term agreed between the original developer and buyers.
The bench was hearing a plea by four homebuyers in Spenta Enclave’s Altavista project, a report by Financial Express said. They had sought a refund after the developer failed to give possession, and argued that their rights under Section 18 of RERA, which provides for a refund in certain cases of delayed possession, should be protected in the resolution plan.
The tribunal did not accept this. Its order said the insolvency resolution process proceeds on the basis of collective resolution of claims and a balancing of stakeholder interests, and that by virtue of Section 238 of the Code its provisions prevail over other enactments in case of inconsistency. It noted that the applicants’ claims stood admitted in the CIRP and their rights were governed by the treatment given under the plan approved by the CoC. They could not insist on "a separate individualised remedy" outside the insolvency framework.
What it means for buyers
The order clarifies what happens when a buyer’s RERA claim runs into an approved resolution plan:
A refund claim under Section 18 may not be enforceable if it conflicts with a plan approved by the required majority of homebuyers.
A resolution agreed to by homebuyers as a class can take precedence over the preferences of individual buyers.
Buyers cannot assume the incoming developer is bound by every promise of the original one.
Because the process aims to revive and complete a stalled project, those who want their money back may have to accept the outcome of the plan, legal experts say.
Experts’ view
Ketan Mukhija, National Co-Head PE, VC Practice at Kochhar & Co, said the collective insolvency process takes precedence under Section 238 of the Insolvency and Bankruptcy Code, 2016, where an individual claim for refund or exit is inconsistent with an approved plan. The ruling does not take away RERA protections, he explained. It underscores that those rights must be examined in the context of the IBC once insolvency proceedings begin.
His advice to buyers is to engage with the insolvency process early instead of relying only on an individual RERA remedy. They should ensure their claims are properly filed and admitted, understand how the plan treats them and use the authorised representative mechanism. In particular, they should check whether the plan offers possession, refund or another form of settlement, since an approved plan can significantly shape the remedies available.
Sahil Chandra, Associate Partner, Dispute Resolution at AK & Partners, said the outcome in insolvency is shaped collectively, but the individual buyer is not left unprotected. He listed four safeguards under the Code. Homebuyers are recognised as financial creditors, on the same footing as banks and other lenders. They can file claims directly with the resolution professional. They have a voice in decisions through an authorised representative chosen by their class of allottees. And they can appeal before the NCLAT and, where appropriate, the Supreme Court of India. Buyers whose cases fall outside this framework also have options, he said.
Chandra noted that the Supreme Court has already dealt with the interplay between homebuyer protection and collective resolution, and that this order "simply applies that settled law to a new set of facts". It offers clarity for developers, resolution applicants and buyers as real estate insolvency cases increase, he said.
Venket Rao, Supreme Court lawyer and founder, Intygrat Law Offices LLP, said the objective of the insolvency code is to resolve a stuck company or, in real estate, a project. Given that objective, the Supreme Court has held that rights or provisions under other laws, including RERA, must give way if they obstruct an approved resolution plan. The Mumbai judgment, he said, upholds the principle that a resolution approved by the majority of homebuyers in a class prevails, and that individual rights under RERA or the Consumer Protection Act, as well as contractual claims, cannot override the plan and the process undertaken to implement it.
