Under the Insolvency and Bankruptcy Code (“IBC”), the claims of homebuyers have led to a number of fascinating developments within the IBC framework, with homebuyers now duly recognised as Financial Creditors under the Code. In addition, the specific interests of homebuyers in claiming their remedies under the IBC framework against real estate companies led to the development of an innovative approach – the Reverse Corporate Insolvency Resolution Process (“CIRP“). This article will trace the development of CIRP and analyse its judicial underpinnings, with a focused attempt to locate the source of the National Company Law Appellate Tribunal’s (“NCLAT”) powers in experimenting under the IBC.

The inception of the IBC in 2016 was a watershed moment in the regulation and resolution of the ails faced by companies in the red. The IBC created a consolidated and robust regime, replacing the complicated and disjointed array of laws that existed before it to address similar concerns, bringing a sense of certainty to the future of insolvency regulation in India. However, as it finishes its sixth year of operation, the IBC has endured a topsy-turvy terrain which has seen some important changes being made to its core framework.

Homebuyers under the IBC: The creation of a sui generis regime

One such seminal development in the IBC’s recent history has been the treatment of homebuyers under the Code. While homebuyers were initially categorised as ‘other creditors’ under the IBC and not recognised as either Financial or Operational Creditors, the tide soon shifted towards a change in this position with the decision of the Hon’ble Supreme Court inChitra Sharma v Union of India. In Chitra Sharma, the Hon’ble Supreme Court recognised the rights of home buyers under the IBC and stated that their interests must be represented in the Committee of Creditors created for the CIRP of the Corporate Debtor, which was Jaypee Infratech Ltd. in the instant case. The position of homebuyers under the IBC gained further impetus when the Hon’ble Supreme Court followed a similar stance as taken in Chitra Sharma in the case ofBikram Chatterji v Union of India, where the Hon’ble Supreme Court was dealing with the insolvency resolution of the Amrapali Group, and re-emphasised the observations in Chitra Sharma qua homebuyers.

After theInsolvency and Bankruptcy (Second Amendment) Act came into force in 2018 (“2018 Amendment Act”), ‘Real Estate Allottees’ as understood under section 2(d) of theReal Estate (Regulation and Development) Act 2016 (“RERA”) were allowed to initiate Corporate Insolvency Resolution Process (“CIRP”) under section 7 of the Code as Financial Creditors. In order to strengthen the claim of homebuyers to initiate CIRP against promoters and developers, an explanation to section 5(8)(f) was added to include the amount spent by homebuyers into a real estate project as ‘Financial Debt’.

The inclusion of homebuyers into the bracket of Financial Creditors was not accepted without protest, and the 2018 Amendment Act was challenged before the Hon’ble Supreme Court inPioneer Urban Land and Infrastructure Limited v Union of India. However, in a major fillip for the rights of homebuyers, the Hon’ble Supreme Court upheld the 2018 Amendment Act and held that the investments of homebuyers that are utilised by developers and their promoters have the commercial effect of borrowing, as understood under the IBC.

However, the inclusion of homebuyers as Financial Creditors brought with it significant logistic hurdles. Given the magnitude of real estate projects in the country and individual homebuyers investing their hard-earned savings towards a particular property or apartment, allowing claims by individual homebuyers presented a real risk of clogging a system that was already suffering from a heavy caseload before the NCLTs. Recognising this predicament, the Insolvency and Bankruptcy (Amendment) Ordinance 2019, which was subsequently replaced by theInsolvency and Bankruptcy (Amendment) Act 2020 (“2020 Amendment Act”), implemented a minimum cap on the number of homebuyers required to initiate CIRP with respect to a real estate project. Under the amended section 7 of the IBC, the threshold was set at either 100 allottees or 10% of the total allottees in a given real estate project, whichever was lesser.

While the 2020 Amendment Act steadied the ship in easing the concerns of stakeholders, the next hurdle which presented itself stemmed from the unique problems faced by homebuyers in enforcing their claims under the IBC.

The genesis of Reverse CIRP: Addressing a burgeoning dilemma

Ordinarily, under the IBC, initiating CIRP against a Corporate Debtor by any Financial Creditor involves the imposition of a moratorium underSection 14 to ensure an efficient and focused consolidation of claims against the Corporate Debtor.

Premised upon the maximisation of the assets of the Corporate Debtor and timely resolution of the insolvency process, the primary goal of the CIRP process is to keep the Corporate Debtor operating as much as is feasible and to bring it under renewed management through the aid of a Resolution Professional. Further,Section 29A of the IBC illustrates that the intention of the legislature is also focused on ensuring that the management and personnel responsible for the company’s precarious financial situation are kept at arm’s length during the CIRP process, specifically with respect to promoters.

However, it was soon realised that for real estate companies, the foundational principles of the CIRP framework would prove counter-productive for addressing the ails of homebuyers. One of the main reasons why the normal CIRP route would prove ineffectual for homebuyers was due to the difference in the nature of the asset in question. There exists a tension between financial institutions and banks as secured creditors, and homebuyers and allottees as unsecured creditors, in the context of CIRP against real estate companies, due to their distinct priorities. While homebuyers value the allotment of the flat or apartment for which they have invested their money in the company, banks and financial institutions do not have any incentive for making the allotment of flats in exchange for their loans and monetary contributions towards the real estate company.

Moreover, in the context of allottees and homebuyers, the Committee of Creditors has no option to consider a haircut since their primary concern is towards securing possession of the allotted flat or apartment developed by the real estate company. These factors came up for consideration before the National Company Law Appellate Tribunal (“NCLAT”) inFlat Buyers Association Winter Hills v Umang Realtech Pvt Ltd. and others (“Winter Hills”).

In the Winter Hills case, the homebuyers had initiated CIRP against the real estate company upon defaults in completing the construction and allotment of flats in the real estate project. Curiously, instead of adopting the traditional CIRP route under section 7, the NCLAT flagged the problems faced by homebuyers under such a route and how their interests are left unserved with a third-party resolution plan. Using a ‘Reverse’ CIRP, the NCLAT appointed the promoter of the real estate company – Uppal Housing Private Limited – as an ‘external lender’ so as to galvanize funds to complete the real estate project and fulfil the needs of the homebuyers. Noting that homebuyers do not have the technical expertise to evaluate the effect on their interests in a third-party resolution plan, the NCLAT pointed out that by using the Reverse CIRP, the interests of all stakeholders will be served optimally. While homebuyers as financial creditors will be provided with their allotted flats/apartments, the infusion of funds by the external lender will help the corporate debtor complete the project in time and use the returns from the allotment of flats to improve its financial health.

However, the NCLAT provided certain riders for the use of Reverse CIRP to aid the interests of homebuyers. First, it stated that the CIRP against any real estate company on the basis of default committed under a particular project shall be limited to that project and will not have any effect over other projects, for which separate proceedings may have to be initiated/resolution plans need to be devised. Second, while a refund of the amount paid towards the allotment of the flat is not a permissible request (and is further provided under section 18 of the RERA), the homebuyers can enter into agreements with the promoter for a refund of the amount after the project is completed, or request the Resolution Professional/Promoter to search for a third-party purchaser for the allotted property.

The NCLAT’s experimental approach, drawing inspiration from the observations of the Hon’ble Supreme Court in the epochal Swiss Ribbons case, has come under scrutiny for taking considerable liberty with its remit under the provisions of the IBC, as well as the NCLAT Rules 2016. While subsequent cases, such asRam Kishor Arora v Union Bank of India and another, have seen the NCLAT uphold its observations of initiating CIRP on a per-project basis, and refer to the decision in Winter Hills favourably, the question which arises for consideration is whether such experimentation and innovation by the NCLAT pass the judicial muster under the applicable law. The next section seeks to answer this very question.

An impermissible attempt to balance competing interests: The future of Reverse CIRP

In Winter Hills, the NCLAT attempted to specifically address the ails of homebuyers within the CIRP framework and realised that the mechanism under the IBC was ill-equipped to provide the remedy which was sought by allottees as Financial Creditors under the Code. While the NCLAT’s approach has been lauded for adapting to the specific context of the plight faced by homebuyers, the decision in Winter Hills leaves a lot to be desired from the perspective of judicial remit under the IBC.

One of the foundational principles under the IBC is the isolation and suspension of the powers of the existing directors and promoters of the Corporate Debtor upon initiation of the CIRP under the Code. As illustrated by the inclusion of Section 29A to the IBC, the rationale behind the move is to provide the Interim Resolution Professional (“IRP”)/Resolution Professional (“RP”) with a clean slate to improve the financial health of the Corporate Debtor and for the Committee of Creditors (“CoC”) to work in tandem with the RP and finalise the optimal resolution plan for the company.

However, through its decision in Winter Hills, the NCLAT has circumvented the established CIRP process under the IBC to tailor the mechanism for homebuyers. While the efforts of the NCLAT in recognising and identifying the barriers of homebuyers in securing their interests under the IBC are commendable, its decision in Winter Hills is devoid of any foundation under the provisions of the IBC, or its remit even under its inherent powers under Section 11 of the NCLAT Rules 2016.

By failing to heed the statutory prohibition of Section 29A, the NCLAT has provided a window for Promoters of the Corporate Debtor to remain in the loop during the CIRP process, which defeats the very rationale for the CIRP process to be denuded of any influence from the suspended management and promoters of the company. While the particular facts and circumstances before the NCLAT in Winter Hills are used to justify the unique approach taken in the case, its value as judicial precedent is hampered due to its ignorance of the statutory principle established under Section 29A with respect to the role of the promoter in the CIRP process.

Moreover, in the absence of a promoter willing to act as an external lender in financing the real estate project, the NCLAT’s Reverse CIRP experiment is stymied as the impasse between the homebuyers and the Corporate Debtor remains unresolved. While the NCLAT makes a passing reference to the idea of experimentation under the IBC hinted at by the Hon’ble Supreme Court in Swiss Ribbons, it fails to source any of its directions to the parties in formulating the alternative scheme of Reverse CIRP within the purview of the IBC. The statutory remit for initiation and operation of CIRP under sections 7 and 9 entails the suspension of the incumbent management, ensuring a clean slate for the IRP/RP and the creation of a tailored resolution plan by the CoC, which has been inexplicably deviated from by the NCLAT, without providing any statutory support under which it would source its authority to make such deviations.

Reverse CIRP has provided a unique perspective to illustrate the specific barriers faced by homebuyers under the IBC. But in severely overstepping from its judicial remit under the garb of ‘experimentation’, the NCLAT’s decision in Winter Hills, and its conceptualisation of Reverse CIRP, stands on feeble grounds in so far as judicial review is concerned. However, it does provide the Legislature and policymakers in the insolvency space with compelling grounds to innovate on tailored approaches to solving the insolvency ails of real estate companies, which will stem from the NCLAT’s important yet judicially impermissible nudge.


The NCLAT’s innovative approach in Winter Hills to conceptualise Reverse CIRP has been commended for recognising the often overlooked ails of homebuyers under the IBC, it has left a lot to be desired in locating the concept within the framework of the IBC, and has deviated from the salient principles on which the CIRP process is built upon. While it remains to be seen whether the NCLAT’s experiment will stand the test of judicial muster, the experiment does provide compelling food for thought to the Legislature and policymakers working in the insolvency space to use the Reverse CIRP model as a tool to develop remedies under the IBC framework which balance competing interests and prioritise stakeholders such as homebuyers in the process.


The views expressed in this article are the original views of the author. The Journal has no contribution to the ideas expressed.

About the Author 

Mr. Sumit Chatterjee is an Advocate at Arista Chambers.

Editorial Team 

Managing Editor: Naman Anand 

Editors-in-Chief: Muskaan Singh & Hamna Viriyam 

Senior Editor: Aribba Siddique 

Associate Editor: Harshita Tyagi

Junior Editor: Kaushiki Singh

Preferred Method of Citation  

Sumit Chatterjee, “Reverse CIRP under the Insolvency and Bankruptcy Code: NCLAT’s innovative approach to protect the interests of Homebuyers” (IJPIEL, 6 January 2023) 


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