Reverse CIRP and Position of Homebuyers

1. What Is Reverse CIRP—and Its Judicial Recognition?

Reverse CIRP (Corporate Insolvency Resolution Process) is a judicial innovation in Indian insolvency law, tailored for real estate. Unlike conventional CIRP—where creditors (often financial or operational) initiate proceedings and a resolution professional (RP) takes control—Reverse CIRP enables the promoter to act as an external lender, inject fresh funds to complete the project, and deliver possession to homebuyers. This ensures faster resolution and avoids forced liquidation or third-party bidding.

• Key Judicial Milestones:

1. Flat Buyers Association, Winter Hills-77, Gurgaon v. Umang Realtech (P.) Ltd. (2020) [1] – The NCLAT first recognized Reverse CIRP, where the promoter agreed to fund and complete the project, subject to IRP supervision and timelines; failure to cooperate would bring the CIRP back on track.

2. Rajesh Goyal v. Babita Gupta & Ors. (2020) [2] – Similar arrangement, with voting by allottees; promoter committed ₹69.27 crores and agreed to structured completion.

3. Bikram Chatterji v. Union of India (2021) [3] Supreme Court held that homebuyers’ claims have priority over other financial creditors and government dues.

4. Anand Murti Vs. Soni Infratech Pvt. Ltd. & Anr. (2022) [4] – Hon'ble Supreme Court endorsed Reverse CIRP, observing that allowing CIRP might increase costs for homebuyers compared to the promoter's plan; promoter gave affidavit assurances (no price escalation, honoring prior agreements, funds ready).

5. Indiabulls Asset Reconstruction Co. Ltd. Vs Ram Kishore Arora & Ors. (Supertech Case) (2023) [5]- Hon'ble Supreme Court once again lucidated the concept of project-wise Reverse CIRP, clarifying that ongoing completion and possession was the practical and legally acceptable way to resolve homebuyer claims.

6. Satish Chander Verma v. Grand Reality Pvt. Ltd. (2025) [6] - This is the first-ever judicial closure of CIRP via the Reverse CIRP route—illustrating its practical viability when homebuyers receive possession and creditors are satisfied. NCLAT closed the CIRP in this case after the promoter completed construction and handed over possession. All homebuyer claims were satisfied; the RP was discharged, and no refunds or further dues remained.

2. Legislative and Regulatory Evolution

• 2018 & 2020 IBC amendments:

  
  

  • Recognized homebuyers as financial creditors under Section 5(8)(f), enabling them to participate in the insolvency process.

  • A threshold for filing CIRP (100 or 10%, whichever lower) was introduced to prevent speculative filings.

    
    

• 2024-25 IBBI Regulation Amendments:

  
  

  • Introduced project-wise resolution, allowing RPs to hand over possession during CIRP (with 66% CoC approval and payment compliance by buyers).

  • Created roles like Facilitators, enhanced transparency via 60-day reporting, monitoring committees, and allowed homebuyer associations to file resolution plans.

3. Current Legal Position: What About Homebuyers Waiting for Refunds or Delayed Compensation?

• Nature of Relief in Reverse CIRP

Reverse CIRP prioritizes possession over monetary claims. The judicial philosophy, as seen in Umang Realtech, is that homebuyers seeking refunds may hinder project completion, which is the principal objective of this route.

• Refunds vs Possession: What's the Order of Priority?

  
  

  • Possession is the primary focus: Homebuyers are expected to receive flats, rather than refunds, to preserve the project's continuity and asset value. Monetary compensation tends to take a back seat unless explicitly provided in the resolution plan or court directions.

  • Refunds or delayed compensation are not guaranteed unless:

    • The resolution plan explicitly includes such compensation, or

    • The court or CoC approves a refund mechanism, alongside or after possession.

  • In celebrated cases like Grand Reality, all claims were satisfied before closure, but that followed actual completion and handing over of units — not before. The focus remained delivery first, then settling claims.

4. Key Takeaways for Homebuyers

• If Reverse CIRP is initiated for a project:

  
  

  • Possession takes precedence over refund or delay compensation/interest claims.

  • Monetary remedies may be considered later, but they are contingent on resolution terms, CoC approval, or judicial directions.

    
    

• Homebuyers must be vigilant about:

  
  

  • Clarity in the resolution plan: Does it explicitly mention refund or compensation?

  • Maintenance of safeguards, especially around transparency (e.g., RERA escrow, monitoring committees).

  • Leveraging IBBI 2025 amendments: They provide greater rights—such as ability to participate in CoC through facilitators, file own plans, and push for timely possession.

5. Position of Homebuyers (Allottees)

• Beneficiaries of Resolution – Homebuyers gain actual possession without haircut or excessive delays; promoter plans often ensure price stability and honoring prior terms.

• Creditor Status & Participation – As financial creditors, homebuyers can influence resolution; 2024-25 IBBI regulations let homebuyer associations submit plans and elect facilitators.

• Speed & Predictability – Reverse CIRP avoids drawn-out bidding and litigation, offering timely completion flows.

• Residual Risks – Monitoring promoter fund usage remains a concern; ex-ante rules (e.g. enforcing RERA escrow) are needed to prevent misuse.

6. Summary Table

Aspect	Traditional CIRP	Reverse CIRP (Current Position)
Promoter’s Role	Excluded from bidding	Acts as lender; funds completion
Buyer’s Primary Relief	Can claim Financial compensation or Possession or both.	Possession prioritized, compensation later
Refunds/Delayed Compensation	May be part of plan	Only if explicitly provided; secondary
Statutory Basis	Clear under IBC	Not statutorily in IBC; evolving via reforms

Conclusion

Reverse CIRP stands as an effective, judiciary-supported framework tailor-made for distressed real estate projects, providing a pragmatic alternative to conventional CIRP. Its guiding principle is timely project completion and protection of homebuyers—who now enjoy enhanced rights and creditor status.

While homebuyers are unequivocally better off under Reverse CIRP—thanks to faster possession, financial stability, and active role—regulatory and procedural safeguards must keep pace. Ensuring consistent enforcement of RERA’s fund segregation, mandating transparent monitoring, and refining project-wise norms are vital to sustain its integrity and credibility.

Homebuyers should expect possession first, with refunds or delayed compensation considered only if incorporated into the resolution framework. For homebuyers awaiting refunds or interest: they remain eligible, but their entitlement hinges entirely on the details of the approved plan or court/CoC orders—delivered after possession in the trajectory of Reverse CIRP.

---

[1] Company Appeal (AT) (Insolvency) No. 926 of 2019.

[2] Company Appeal (AT) (Insolvency) No. 1056 of 2019.

[3] Writ Petition (Civil) No. 940 of 2017.

[4] Civil Appeal Nos. 7534 of 2021.

[5] Civil Appeal No. 1925 OF 2023.

[6] Company Appeal (AT) (Ins.) No. 289 of 2023.