In a significant and reformative judgment, the Supreme Court has provided much-needed clarity on the long-debated overlap between the Real Estate (Regulation and Development) Act, 2016 (RERA) and the Insolvency and Bankruptcy Code (IBC). The Court has held that RERA will be the primary and preferred remedy for homebuyer grievances, while IBC should be invoked only in exceptional circumstances and strictly as a last resort.
This ruling comes at a crucial time when many homebuyers across the country have been using insolvency petitions to initiate corporate insolvency proceedings against defaulting developers. While the intent was often to secure justice, this approach unintentionally led to delays, project disruption, and financial instability for developers and genuine buyers alike. Recognizing this imbalance, the Supreme Court has emphasized that RERA is a specialized, consumer-centric legislation designed specifically to deal with real estate disputes, refunds, delays, and possession issues in a structured, regulated manner.
The Court also drew a sharp distinction between genuine homebuyers seeking shelter and speculative investors who park funds in real estate for commercial gains. According to the judgment, speculative or investment-driven buyers cannot misuse IBC as a tool to pressurize builders into repayment or litigation settlement. The Court highlighted that IBC is not meant to act as a weapon but as a mechanism of insolvency resolution, not punishment.
By placing RERA at the forefront, the Supreme Court has reinforced the idea that real estate insolvency should remain reformative rather than punitive. RERA’s mechanisms—such as compensation, interest for delay, project monitoring, and strict regulatory oversight—serve the genuine needs of homebuyers far more constructively than insolvency proceedings, which often lead to prolonged litigation or complete project standstill.
This judgment marks an important course-correction in India’s legal landscape. It protects genuine homebuyers, prevents misuse of IBC, and strengthens RERA’s status as the main forum for resolving housing disputes. At the same time, it restores balance in the real estate ecosystem by discouraging speculative litigation.
