To drag a defaulting builder into insolvency, homebuyers cannot file alone. A Section 7 application at the NCLT must be JOINT: at least 100 allottees of the same real estate project, OR 10 percent of that project's total allottees, whichever number is fewer. This is the rule the Supreme Court upheld in 2021.
If you are short on time, jump to the worked example below to find your project's exact number, then read why RERA, not insolvency, is usually the faster route to your money.
Count the flats in your project. Take 10 percent of that count. Compare it to 100. The SMALLER of the two is the number of buyers you must band together to file. Big projects cap at 100. Small projects need only their 10 percent.
This bar comes from the second proviso to Section 7(1) of the Insolvency and Bankruptcy Code 2016, inserted by the IBC (Amendment) Act 2020. The exact words are:
“…an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less.”
The maths is simple once you know your project size. Work out 10 percent, then apply the “whichever is less” cap at 100.
| Total flats in project | 10 percent of project | Compare to 100 | Buyers you need |
|---|---|---|---|
| 300 flats | 30 | 30 is less than 100 | 30 buyers |
| 700 flats | 70 | 70 is less than 100 | 70 buyers |
| 2,000 flats | 200 | 100 is less than 200 | 100 buyers |
So a 700-flat project needs 70 buyers. A 300-flat project needs only 30. A 2,000-flat project needs 100, because the law caps the requirement at 100 no matter how large the project grows. “Project” means the same registered real estate project, not the whole township.
Before 2020, a single homebuyer could file to push a builder's company into insolvency. That triggered a flood of single-creditor cases and gave individuals huge leverage to extract private settlements.
Parliament added the joint-filing bar to stop that. The idea is that insolvency, which freezes the whole company, should start only when a real body of buyers backs it, not one aggrieved person.
Investors challenged the rule as unfair. The Supreme Court rejected the challenge in Manish Kumar v. Union of India, decided on 19 January 2021. The Court held there is no absolute right to file under Section 7, and the legislature can set conditions on that statutory right. The threshold stands.
This is the most important decision you will make. Pick the wrong forum and you waste months.
Understand what insolvency actually does. An IBC filing starts a Corporate Insolvency Resolution Process (CIRP) against the BUILDER COMPANY. As allottees, you become financial creditors. A resolution professional takes over the company, and you recover only through an approved resolution plan or the liquidation waterfall. It is not a personal refund to you. You may get a new developer who finishes the flats, a haircut on your claim, or a share of sale proceeds, but you lose direct control.
RERA does the opposite. Under Section 18 of RERA, if the builder misses the promised possession date, YOU can withdraw and claim a full refund of what you paid PLUS interest, or stay and claim delay compensation. The order runs in your name, for your money.
| Factor | RERA (Section 18) | IBC (Section 7 CIRP) |
|---|---|---|
| What you get | Refund + interest, to you directly | Recovery via resolution plan, shared with all creditors |
| Who you need | File alone | 100 buyers or 10% of project |
| Control | You drive the complaint | Resolution professional takes over the builder |
| Best when | Builder is solvent but delaying | Builder is genuinely insolvent and stalled |
Treat IBC as a LAST RESORT. If the builder still has money and is merely delaying, RERA gets your refund faster and in your own name. Reach for insolvency only when the developer is broke, the project is dead, and a refund order would be a paper victory because there is nothing to recover. Read the RERA refund and compensation route for builder delay before you commit to insolvency.
Once your group meets the threshold, the procedure is mechanical.
CIRP cannot start unless the corporate debtor's default is at least ₹1 crore. This minimum was set by notification S.O. 1205(E) dated 24 March 2020. This is the builder's default amount, not a per-buyer figure, so a banded group of allottees usually clears it easily.
Gather allottees of the SAME registered project. Collect each buyer's allotment letter, builder-buyer agreement, payment receipts, and the missed possession date. The group may nominate one allottee to act on behalf of all.
A financial-creditor application under Section 7 is filed in Form 1, under Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. Attach the record of default and propose an interim resolution professional registered with the IBBI (Insolvency and Bankruptcy Board of India).
Serve a copy on the builder's registered office and on the IBBI before filing. Then file at the NCLT bench having jurisdiction over the builder company. Engage an insolvency lawyer; a defective application is routinely rejected.
If your builder has given a personal guarantee, a parallel route exists against the promoter. See the personal guarantor insolvency process at the NCLT.
No. Since the IBC (Amendment) Act 2020, an allottee application under Section 7 must be joint. You need at least 100 allottees of the same project, or 10 percent of that project's allottees, whichever is fewer. A lone buyer cannot trigger CIRP. For a solo remedy, use RERA Section 18 instead.
The LOWER one. You compare 100 against 10 percent of the project and use whichever is smaller. A 5,000-flat project still needs only 100, because the law caps the requirement at 100. Large projects never need more than 100 allottees.
Not directly. IBC starts a resolution process against the builder company, where you rank as a financial creditor and recover through an approved resolution plan or liquidation. You may face a haircut. RERA Section 18 gives a refund plus interest in your own name. That is why RERA is usually the better first move.
It is the specific project registered with RERA, identified by its registration number, not the whole township or the builder's other developments. Allottees of Tower A and Tower B count together only if they are part of the same registered project. Check the RERA registration certificate to confirm scope.
Yes. In Manish Kumar v. Union of India, decided on 19 January 2021, the Supreme Court upheld the second proviso to Section 7(1). The Court held there is no absolute right to file under Section 7 and that Parliament may attach conditions to that statutory right. The threshold is constitutionally valid.
A financial-creditor Section 7 application is filed in Form 1 under Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. It must record the default, propose an IBBI-registered interim resolution professional, and be served on the builder and the IBBI before filing at the NCLT.