From Creditors to Resolution Applicants: Re-examining the Homebuyers' Role under the IBC

I. Introduction

On December 3, 2025, the National Company Law Tribunal Kolkata Bench (NCLT), in the case of Canara Bank Limited (formerly Syndicate Bank) v. Riverbank Developers Private Limited, (Riverbank) pronounced a significant ruling upon the treatment of homebuyers within the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code 2016 (IBC). The primary issue that the NCLT dealt with was whether homebuyers, despite being statutorily recognized as financial creditors, could be compelled to bear the commercial and execution risks conventionally borne by Resolution Applicants (RAs).

This blog examines the Riverbank decision, which holds that the IBC does not permit end-user homebuyers to be turned into de facto developers, pertinently in near-complete housing projects. It analyses the NCLT’s reasoning on homebuyers as a distinct class of financial creditors. Further, it emphasises the principle of equitable treatment within the same class and affirms that IBC prohibits selective imposition of disproportionate commercial and execution burdens on one segment of homebuyers within the same class of financial creditors.

II. Brief Background of the Dispute

During the CIRP of Riverbank Developers Private Limited, initiated at the instance of Canara Bank Limited (formerly Syndicate Bank), a group of 253 homebuyers of Hiland Green Phase II (Towers 11-20) approached the NCLT. The issue arose when the real estate projects were divided into parcels. While Parcels 2, 4, and 5 were opened to financial investors and Asset Reconstruction Companies (ARCs), Parcel 3 was restricted only to a registered association of homebuyers. Parcel 3 contained the applicants’ flats. The project was already 80-85% complete, and over 90-95% of the sale consideration had been paid. The applicants argued that land and unsold inventory were wrongly shown as having nil value. This discouraged bidders and forced homebuyers to complete their own stalled project as RAs.

The homebuyers argued on the premise that they faced unfair treatment within similar class of financial creditors. They emphasized upon the finances spent on the residential flats already booked by them. It was argued that although the Committee of Creditors (CoC) was primarily dominated by institutional creditors, the insolvency risk was transferred to homebuyers who did not have sufficient means.

The NCLT held that homebuyers could not be compelled, directly or indirectly, to act as RAs. Reserving Parcel 3 only for homebuyers violated equitable treatment. The NCLT directed that Parcel 3 be opened to all resolution applicants through a fresh Form-G.

III. Critical Analysis and Implications

The jurisprudence concerning homebuyers under IBC shows a pattern of judicial precedents of aligning the code’s foundation with the real estate allottees. The Riverbank ruling addressed a key point, whether homebuyers, despite being recognised as financial creditors, can be compelled to act as Resolution Applicants (RAs).

Under the IBC, creditors and RAs have distinct roles. A creditor is simply concerned with repayment, whereas an RA bears the commercial and execution risks involved in restoring the company to viability.

a) Homebuyers as a Distinct Class of Financial Creditors

Homebuyers, though treated as financial creditors, are different from banks or financial institutions. They do not lend money to the developer as part of a commercial transaction. Instead, they buy homes for their personal use as end-users. Therefore, their relationship with the developer is essentially a consumer relationship, not a commercial one.

This distinction is not just sociological; it has legal ramifications as well. The goal of recognizing homebuyers as creditors via the 2018 amendment was not to make them surrogate project financers but rather to safeguard a structurally vulnerable group of consumers with no real negotiating power and institutional protection. Therefore, the homebuyers’ legal status as financial creditors should take precedence over the assumed role as an RA.

b) Enforcing Dual Role on Homebuyers: A Doctrinal Conflict

Against this statutory framework, when homebuyers are compelled to step into the shoes of resolution applicants and assume a dual role, it leads to a severe doctrinal conflict. This eliminates the distinction between creditors and RA created by the IBC and forces one class of persons to perform two structurally incompatible roles.

This has been demonstrated by the Riverbank case. The arrangement opened Parcels 2, 4, and 5 to financial investors and ARCs, whereas Parcel 3 was restricted to only the registered association of homebuyers. This eligibility criterion was inappropriate for Riverbank’s affairs because it explicitly limited buyers’ access to a specific parcel of land.

It placed an additional burden on homebuyers by making them bear the execution risk of the project. As a result, they were pushed into managing the project’s completion, which made it harder for them to recover their invested money. Thus, instead of being treated as financial creditors, they were forced into acting like de facto resolution applicants.

c) Statutory Unity over Hyper-Classification of Homebuyers

This problem becomes evident when examined in light of the statutory position of homebuyers under the IBC. After the legislative insertion of Section 5(8)(f) into the IBC, the earlier conceptual ambiguity as recognition of allottees as financial creditors came to an end. This was upheld in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, wherein the Supreme Court (SC) held that homebuyers represent a vulnerable class and would be left stranded, with no remedial recourse if their projects are abandoned.

Homebuyers, regardless of the construction stage or whether amount being paid or not, possess an equitable legal status under the IBC. According to standard-form builder agreements, homebuyers hardly have any say on the bargaining aspect. Thus, fragmenting this class should comply with both the IBC’s requirements and constitutional validity under Article 14 of the Constitution.

This principle has been crystallized in Vishal Chelani v. Debashis Nanda, wherein the SC rejected the argument that homebuyers who have sought remedies under Real Estate (Regulation and Development) Act (RERA) could be excluded from the class of financial creditors in CIRP. In fact, the SC characterized such differentiation as hyper-classification and emphasized that treating a segment of homebuyers differently because they sought refund of their hard-earned money under another statute is inequitable and unconstitutional.

The Riverbank case presents a functional extension of this principle. By restricting a parcel of the project exclusively to registered associations of incumbent homebuyers, the resolution framework in effect sub-classified financial creditors, without a reasonable nexus, who were expected to resolve the insolvency themselves. Even though prima facie the arrangement may seem neutral, it has disproportionately burdened existing homebuyers, who had already paid most of the consideration and continued to service housing loans. This severs them from the statutory unity recognized under Section 5(8)(f).

d) Judicial Protection of Homebuyers under the IBC

Judicial sensitivity to the hardships faced by homebuyers is not a recent development. In Puneet Kaur v. K V Developers Pvt. Ltd., the National Company Law Appellate Tribunal (NCLAT) held even homebuyer claims that were not formally filed but were reflected in the corporate debtor’s own records had to be considered. The Tribunal recognised that homebuyers, often middle-class families, may not even become aware of CIRP proceedings while continuing to repay loans on undelivered homes.

Similarly, the case of Shailendra Agarwal v. Asit Upadhyaya, the NCLAT reaffirmed that homebuyers retain their position as financial creditors. This is regardless of whether they possess RERA recovery certificates. Further, any attempt to treat homebuyers unfairly and discriminately was viewed as arbitrary and violative of Article 14 of the Constitution.

The Riverbank ruling follows the same compassionate and principled approach. It makes it clear that just because homebuyers vote collectively does not mean they have the financial ability to resolve the insolvency, and they cannot be expected to put in more money simply to recover what they have already paid for.

IV. Recommendations and Conclusion

The Riverbank case reflects that near-complete housing projects ought to be restricted from being classified as liabilities under IBC. Although the project was almost completed (85%), it was still reflected as a liability. This classification restricts the ability of bidders to acquire such assets. Since unsold housing stock continues to exist, these projects must be treated as a going concern. This ensures and promotes value maximization under the IBC and safeguards the interests of homebuyers.

This decision also cautions against authorising homebuyers to become responsible authorities through conditions attached to their eligibility. In addition, the IBC should prohibit the distribution of changing risks associated with building projects and future funding obligations to one class of investor. With regards to near-project completion, an Expression of Interest (EOI) list of rights should be available to third parties who wish to develop or invest in the project, which is a way to allow for both competition and maintain homebuyers as creditors and not as developers of a project.

The Riverbank Dispute reflects the need for an adequate project completion mechanism under IBC, drawing from the concept of reverse CIRP, although statutorily unrecognized. Thus, there should be a well-structured and judicially scrutinised procedure for completing construction, ring fence cash flows and selling of unsold units. Most importantly, this process needs a resolution applicant whose role should not be pushed upon already burdened, ensuring workable resolution plans.

About the Author

Kavya Jindal and Suhani Sharma are law students at National Law University Odisha.

Editors

Abhimanyu Vyas, Senior Editor

Muhammed Rayhaan, Assistant Editor